Current Account: Definition and What Influences It
What is Current Account?
A current account is a type of deposit account maintained by people who regularly conduct a very high volume of transactions with banks. Current accounts are related to liquid deposits and provide a wide range of tailored solutions to facilitate financial transactions.
Furthermore, current accounts allow the use of the bank's check (cheque) feature to pay creditors. Cheque payments to creditors can be made with ease using this account. Current accounts typically don't pay interest and have greater minimum balance requirements than savings accounts. The primary benefit of this account is that the holders can quickly use an overdraft facility up to a certain limit.
Most commercial banks offer the option of opening a current account; furthermore, the number of transactions that can be conducted with them is typically not restricted. Businesspeople like owners, partnership businesses, trusts, associations of persons, private and public organizations, etc., are the main ones who open current accounts.
Money could be deposited and withdrawn by customers at any time without prior notice. The major goal of the "current account" is to enable account holders to perform their financial transactions without experiencing any difficulties.
Types of Current Accounts
Banks provide a range of "current accounts" to fulfill the diverse banking requirements of their clients. It is essential to note that different banks may offer different current account types. The account type that is best suited for the kinds of transactions that one intends to perform should be chosen accordingly. The different types of accounts offered by the majority of banks are listed below:
Basic Current Accounts
It is appropriate for clients with limited/low incomes, such as pensioners, young people, and others. It makes it very simple for the clients to handle their finances. The maximum daily cash withdrawal is subject to a few limitations, though.
Standard Current Accounts
Holders with this account type are required to maintain a minimum average monthly balance. There is no interest earned on the money deposited into the account. However, it offers its clients overdraft, chequebook, and debit card services, among other things.
Premium Current Accounts
This account category gives its members special offers and benefits. Large-value transactions are best handled with this account.
Packaged Current Accounts
This type of current account offers several benefits and perks to account holders. It includes special features such as travel insurance, medical support, and more.
Foreign Current Accounts
This account type is offered to NRIs and others who often want to transact in foreign currencies.
Features of a Current Bank Account
One of the most important prerequisites for beginning a business is having a "current account". Banks now provide a variety of attractive offers and incentives on current accounts to accommodate the various requirements of businesses. Some of the basic characteristics of a current account are mentioned below:
Advantages of Current Account
Some of the pros of current account are mentioned below:
Disadvantages of Current Account
Despite the many advantages of current accounts, there are also a few disadvantages to be aware of. It's important to note that current accounts differ between banks, so be sure to research the options offered by banks. Some of the cons of current account are mentioned below:
What are the various methods for making a cash deposit into a Current Account?
Any of the following ways may be used to deposit funds into a current account:
Current Accounts offer Various Types of Access
Any of the following approaches may be used to access a current account for everyday cash transactions:
A person can go to their parent branch for a range of banking requirements, including "Cash Withdrawals", "Deposits", "Financial Assistance", etc. However, even at a bank branch, there may be fees associated with withdrawals or deposits over a specific limit.
It is one of the conventional methods for taking money out of a "current account". Many clients still favor using cheques, although online banking is replacing the majority of physical transactions.
Automated Teller Machines (ATMs)
One can withdraw money from any nearby ATM without going to a branch. ATMs enable cash withdrawals even after regular banking hours, although the withdrawal limits are modest.
Account users have access to a variety of banking functions through the online banking service, including the ability to transfer money, clear payments, view statements and balances, and many more. Since one can conduct transactions even outside of regular business hours, it is one of the most popular ways to access a current account. With only a few clicks, one can transfer funds from their account without having to stand in line or fill out any paperwork. Nevertheless, internet transfers have a limitation, above which a cheque is required to complete the transaction.
The majority of the top banks offer phone banking services that let consumers conduct a variety of tasks over calls. Using the phone banking feature, one can review their transactions, send payments, or check their balance.
How does one choose the right current bank account?
Opening a current account is mostly done to facilitate smooth commercial transactions. It makes it simple for clients to handle large-value payments and bulk transactions. Making the appropriate account selection is thus very crucial. When selecting the best account choice, all the factors should be taken into consideration. The following are some important factors to consider while selecting a current bank account:
A customer's account should always have a minimum balance in order to keep it from expiring or becoming inactive. The minimum balance requirement for current bank accounts is considerably larger than for savings accounts. This is important for the user to remember because different account variants have different minimum balance requirements.
Fees, Charges, and Overdraft Costs
The charges and fees differ from one account to another. Important factors such as fees for cash withdrawals, demand draughts, money transfers, and overdrafts, among others, must be taken into account by users.
Cash Deposit Limit
The maximum amount that can be deposited for free each month varies depending on the bank and the kind of account.
Savings Account vs. Current Account
Savings accounts are intended to help account holders save and increase their funds. Banks provide a perk in the form of interest on the money deposited, which is a great advantage of the saving account. The current account, on the other hand, enables hassle-free operation of regular commercial transactions. Banks offer current account customers overdraft and loan services to make sure that there are no funds shortages.
Savings accounts typically have specific transactional limits. One can only make a specific number of withdrawals from their account each month-usually between three and five-at ATMs and bank locations, depending on the bank. A fee could be applied if someone makes more transactions than are permitted. Deposit and withdrawal limits are uncapped and unrestricted for current accounts. If necessary, they can easily withdraw money multiple times each day.
Maintaining balance is another aspect where a Savings Account and a Current Account contrast. Typically, a savings account has a lower minimum balance requirement; in contrast, a current account has to maintain a significantly larger minimum balance requirement. If the account's minimum balance is not maintained, then the respective account holders have to pay the necessary fees (penalty) for not maintaining the funds. However, the charges may vary from bank to bank.
Banks pay interest on the money placed in savings accounts, which typically ranges from 2 to 4.5% annually, where the interest is calculated on the daily outstanding balance and is typically credited to the account every quarter. Banks and other financial organizations have different time frames for when interest will be credited and may vary from one another. On the other hand, banks do not usually pay interest on the money received and placed in a current account.
A savings account can be used by anyone for their personal needs and is suitable for those who are salaried or receive a monthly income. A current account, on the other hand, is generally best for traders, businesses, corporations, etc., who often need to access their funds.
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