What Is The Difference Between Current Account And Deposit Account

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Difference Between Current Account And Deposit Account

What Is A Current Account?

A current account is for use by sole proprietors, companies, partnerships, associations, trusts, etc. to make current transactions. All business transactions are conducted through a current account. A current account does not have an end or maturity date.

What Is A Deposit Account/Savings Account?

A savings account is a basic deposit account for an individual to carry out day-to-day transactions and withdrawals. A deposit account can be held individually or jointly by two or more people. A savings account does not have an end or maturity date as well.

Difference Between Current Account And Deposit Account

Some of the differences between a current account and a deposit account are:

  • Interest

Interest applies to the minimum balance available in a deposit account. The interest is applicable on the minimum account balance, every day. Banks offer interest rates of 4% or more on savings accounts. Current accounts, on the other hand, are non-interest accounts. There is no interest for any balance in a current account. Although, this may change in the future.

  • Transaction rates

Transaction rates apply for withdrawals made over the limit of free withdrawals (usually 3-5) made in deposit accounts. Thus, a savings account holder will have to pay the transaction rate applicable by the bank (eg: INR 20, 25, 50, 90, etc.). Conversely, there are no transaction rates applicable on current accounts. Businesses transact more than individuals and thus, there is no transaction rates or limits on current accounts.

  • Minimum balance

Deposit account-holders must maintain a daily average minimum balance in their account. This amount varies from bank to bank and some banks even offer zero-balance deposit/savings accounts. In this case, current account-holders also must maintain a minimum balance in their bank accounts. The minimum balance required for a current account is much higher than the minimum balance required for deposit accounts.

  • Overdraft facility

Deposit account-holders can only withdraw what balance is in their saving account. Banks do not offer overdraft facilities on saving accounts unless the customer is a salaried account-holder (approved companies). Whereas, current account-holders can withdraw over and above the balance in an account. Overdraft facilities help businesses to make up cash flows when there is a shortage of funds. Interest is applicable to the overdraft amount taken.

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