Current Account In Banking: Everything You Need To Know
21 June 2022
Banks have different types of accounts that cater to individuals having different sets of interests. Among different accounts, the two most popular types of bank accounts are current account and savings account. While a savings account caters to individuals, a current account is designed for businesses. Current accounts come with high transaction limits on cash deposits and withdrawal.
Read on to know more about current accounts.
What is a Current Account?
A current account is a facility banks provide for business owners with a higher volume of daily transactions. It is significantly different from a savings account meant for people who want to maintain their savings over time. A current account has several perks associated that are favourable for firms, companies, businesses, and public enterprises.
Customers can easily customise their current accounts based on their requirements. This is an additional facility provided by the concerned bank and differs based on the customer and frequency of transactions. Furthermore, current accounts deal with deposits that are liquid in nature and hence require a higher minimum balance at the time of account opening.
Features of a Current Account
Following are the features of a current account:
Higher transaction limit than savings account.
A current account is usually an interest-free account (however some banks offer interest rates on current account deposits).
It requires a higher amount of minimum balance at the time of opening the account.
Businesses, firms, individuals, company owners, etc., can operate current accounts. However, a business cannot have multiple current accounts.
Current accounts do not have a limit on cash deposits in the home branch.
The primary objective of a current account is to smoothly carry out business transactions.
Penalty charges could be levied if the minimum balance isn’t maintained.
Benefits of a Current Account
The benefits of a current account are listed below:
Businesses can carry out extensive and frequent transactions every day.
There’s no limit on cash withdrawals.
Cash deposits in the home branch can be carried out without worrying about a limit.
Customers can get an internet banking facility with a current bank account.
Customers can make direct payments through the cheque facility offered by the bank for current account holders.
Customers also get an overdraft facility with a current account.
Apart from the benefits mentioned above, there are certain disadvantages of a current account. They are as follows:
Current bank accounts are usually interest-free accounts; therefore, customers will not get the advantage of a monetary benefit on their money in a current account.
Due to rendering additional services with current accounts, most banks charge high fees from customers.
Banks could also impose a limit on the number of free cheque books and demand drafts for current account holders.
The most prominent disadvantage of a current account is that account holders have to maintain a high amount of minimum balance in their accounts at all times. Without said balance, banks may levy penalty charges.
A current account might help you with frequent transactions, but every transaction is subjected to a predetermined fee by the bank.
Contrary to a savings bank account, a current account holder cannot automate bill payments on a set date. This is a major inconvenience if you have only one functioning account for your business and have to pay monthly bills.
Types of Current Account
There are mainly five types of current accounts. They are listed below:
Standard Current Account: A standard current account is the basic current account facility offered by banks. It is a non-interest-bearing account with an unlimited number of daily transactions. It also provides free cheque books, demand drafts, etc.
Premium Current Account: Contrary to the standard current account, a premium current account holder enjoys a barrage of customised features offered by the bank. These are included to facilitate the customer to run their business transactions as per their needs and requirements.
Packaged Current Account: This type of current account lies somewhere in between a standard and a premium account. Under a packaged current account, the account holder enjoys certain additional perks offered by the bank. These may include travel insurance and accidental insurance.
Foreign Currency Account: For people who perform international transactions on a daily basis, a foreign currency account is ideal. This current account alternative is for those customers who have inward and outward flows of money into their account in foreign currencies.
Single Column Cash Book: A single column cash book is a way to monitor your finances without maintaining a bank account. If you do not want the additional facilities of a current account, you can opt for this type of credit monitoring with the help of two separate columns of debit and credit finances.
How to Open a Current Account?
If you are wondering how to open a new current account offline, follow the steps given below:
The first step in opening a current account is to verify your eligibility. You can contact the respective bank’s website and find the list of the eligibility criteria for qualifying to be a current account holder.
Now, go to the bank’s website and download the application form. You can also avail of the same from the bank’s nearest branch physically.
Fill the form with accurate details regarding your bank statements, personal information, and business.
A list of documents will be available online on the bank’s portal to be submitted with the application form. So get the list of required documentation and submit everything for a smooth account opening process.
Submit the application form with the attached documents on the website. You can do this in person at your nearest branch of the concerned bank.
The bank will verify every detail and open the current account in your name.
Documents Required to Open a Current Account
Following are the documents required for a current account:
Application form, duly filled and signed
A cheque for opening the current account
Copy of the business partnership deed
Address proof of the business, firm, company, etc.
Memorandum of Association
Article of Association
Certificate of Incorporation
Sales tax receipts
What is the Difference between a Savings Account and a Current Account?
A savings account is designed for salaried individuals who want to deposit their money in an account that would help them earn interest over the deposited amount. On the contrary, bank current accounts are usually interest-free deposit accounts that are designed for businesses to simplify daily transactions. Savings account transactions are limited whereas current accounts have high transaction limits and have (usually) zero limitations on withdrawals. However, the minimum balance requirement for current accounts are significantly higher than that of savings accounts.
Current accounts ease the business operations, especially for start-ups as they help the owner build a firm with a regular flow of income. By opening a current account in your name, you will be able to enjoy a lot more than just monetary deposits and withdrawals. You will also get additional benefits in the form of cheques, DDs, net banking, etc.
FAQs on Current Account
Q1. How will I receive my current account details after opening one with a bank?
Ans: You can receive your registered email ID details after opening a current account.
Q2. What is the age requirement for opening a current account?
Ans: The minimum age requirement for a current account is ten years. However, only a person who is or above 18 years of age can avail of the chequebook facility.
Q3. Can I open a current account without complete documentation?
Ans: No, proper and complete documentation is required for opening a bank account.
Q4. How many times would I have to submit KYC documents to the bank?
Ans: You only have to submit KYC documents once for opening a current bank account.
Q5. Will I get the facility of SMS banking under a standard current account?
Ans: You will get an SMS banking facility under a standard current account.
Q6. How much interest can one earn on current account deposits?
Ans: Current accounts are interest-free deposit accounts. So, you won’t be earning any interest on your deposits. However, some banks may provide interest on current account deposits. Check with the concerned bank regarding this.
Q7. What is the minimum balance required to open a current account?
Ans: The minimum balance required to open a current account could vary from bank to bank and could range from Rs.10,000 – Rs.1 lakh.
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Disclaimer: This article has been prepared on the basis of internal data, publicly available information and other sources believed to be reliable. The information contained in this article is for general purposes only and not a complete disclosure of every material fact. It should not be construed as investment advice to any party. The article does not warrant the completeness or accuracy of the information, and disclaims all liabilities, losses and damages arising out of the use of this information. Readers shall be fully liable/responsible for any decision taken on the basis of this article.
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