There may be instances where you may have come across the question, ‘What is a current account?’. Here’s what it means.
The banking sector offers different types of accounts that cater to your diverse financial needs. One such account is a current account, best suited for business owners and companies.
As such, it has some distinguishable attributes from a savings account, which allows it to service the specific needs of enterprises. Read on to learn about the current account, its features, benefits, how it differs from a savings account, and more.
Table of Contents
- Current Account: A Brief Overview
- Features of a Current Account
- Difference Between a Current Account and a Savings Account
- Steps to Open a Current Account
- FAQs on Current Account
- What is meant by a current account in a bank?
- Does the current account have an ATM card?
- Can I convert my savings account to a current account?
- Can I withdraw money from a current account?
Current Account: A Brief Overview
This is a type of non-interest-earning bank account mainly operational for business-related transactions. This explains why there aren’t restrictions on the number of transactions, such as cash withdrawals, fund transfers, cash deposits, etc., in a current account.
The following entities can open a current account:
- Individuals
- Sole proprietors
- Partnership firms
- Private companies
- Public limited companies
- Societies
- Trusts
- Hindu Undivided Family
Features of a Current Account
Here is a quick overview of the features and benefits of a current account.
| Feature & Benefits | Description |
|---|---|
| No Interest | This type of account does not earn interest on the deposit. |
| Easy Access | Using this account, you can access your funds instantly via card, cheque, net banking, mobile banking, etc. |
| Higher Withdrawal Facility | You can make an unlimited number of withdrawals from your current account. |
| No Limit | This account doesn’t have a limit on the number of transactions you can make in a day, which can be beneficial for businesses. |
| Overdraft Facility | Despite exhausting your account balance, you can still withdraw funds using the overdraft feature of the current account, which gives you access to instant credit. |
| Minimum Balance | All banks have different limits for minimum average balance, which you must maintain to avoid penalties. |
Difference Between a Current Account and a Savings Account
To better understand the meaning of a current account, here are all the differences you need to know.
| Parameters | Savings Account | Current Account |
|---|---|---|
| Purpose | Generally used to secure funds for short-term goals, build an emergency corpus, or earn interest on surplus funds | Used to make regular transactions for business-related expenses |
| Suitability | Ideal for salaried employees and people with regular income | Suitable for individuals who require a high transaction limit, such as business owners, entrepreneurs, self-employed professionals, etc. |
| Interest | Earns interest annually depending on the rate, which varies from one bank to another | Doesn’t earn any interest |
| Overdrawing Facility | This type of account does not allow the withdrawal of funds over and above the available balance | You can withdraw additional funds to meet emergency financial requirements |
| Minimum Balance | Requires you to maintain a minimum balance depending on the financial institution | The minimum balance requirement depends on the respective bank |
| Transactions | You can only make limited transactions per day | There is no limit to the number of withdrawals you can make in a day |
Steps to Open a Current Account
Here is a step-by-step guide on how to open a current account.
- Step 1: Choose a bank by comparing their benefits, eligibility criteria, and other account features
- Step 2: Visit the bank’s website
- Step 3: Go to the ‘Current Account’ section and check the account opening options
- Step 4: Fill in the form with your personal and other details
- Step 5: Download the form and take out a printout
- Step 6: Visit your nearest bank branch
- Step 7: Apply with the relevant documents
- Step 8: Complete the KYC process and make an initial deposit
Following these steps, you can easily open a current account with your preferred bank. However, all financial institutions have their eligibility criteria, a variety of account types, and required documents, which you must check before applying.
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FAQs on Current Account
What is meant by a current account in a bank?
This is a type of banking account used by merchants, business owners, and companies to make day-to-day transactions. Companies also open current accounts for their employees for salary transactions.
Does the current account have an ATM card?
Yes, you can use this card to withdraw funds as well as authenticate your digital payments.
Can I convert my savings account to a current account?
No, it isn’t possible. Remember, a current account has been exclusively designed for business transactions. Since a current account has additional benefits to a savings account, it makes business transactions easy.
Can I withdraw money from a current account?
Yes. You can withdraw money from your current account using an ATM card without any limit on daily transactions.
