When opening a bank account, you are always asked whether you want savings or a current account. If you don’t know which one you should select, you will end up opening the wrong account that will not serve your purpose.
Understanding the difference between a current and a savings account will help you choose the correct bank account catering to your needs. So, what is the difference between the two?
Let’s see what is a current account and a savings account to understand which one you should pick that suits your requirements.
A current account is a type of bank account that facilitates frequent transactions. Thus, you need a current account to withdraw money, receive frequent payments, and make purchases.
The primary purpose of the current account is to allow frequent changes to the account in terms of debit and credit transactions. Thus, you can manage and keep track of your income and expenses through your current account.
Current account is the most suitable option for everyone who wants to receive money or make payments regularly. Let’s look at the features of a current bank account.
Mostly, a regular current account will be the most suitable for your needs; however, there are two more types of current accounts that you can open with a bank. So, let’s understand three types of current accounts.
|Regular Current Accounts||Islamic Current Accounts||Premium Current Accounts|
|These accounts offer regular features of a current account, and most banks in the UAE offer these accounts.||Compliant with Shariah Laws of Islamic Banking, these accounts consider the mutual risk and profit sharing between parties as provided in the law.||You can open a premium current account to get additional benefits and features if you maintain a higher balance.|
Now that you know a current account, let’s also understand what a savings account is and its features.
A savings account is a bank account you use to deposit money and earn interest on the available balance. Savings accounts require lower minimum balances than current accounts.
The advantage of having a savings account is that you can earn interest on the amount you store in this account, which you don’t get when you have a current account. Moreover, it allows you to withdraw or transfer money as well.
Let’s see the salient features of the savings account and who should have a savings account.
Although you earn interest income on the savings account, you may be charged different types of charges applicable to you. Let’s see which charges you might be paying if you decide to have one.
Transaction charges: Banks may charge a portion of your transaction amount as transaction charges even if you got your debit card for free.
Withdrawal fees: While some banks offer certain numbers of withdrawal transactions for free, many banks charge withdrawal fees for every withdrawal made from the savings account.
Monthly charges: When your balance falls below the required minimum balance by the bank, they will charge you monthly maintenance charges.
Statement charges: When you need a physical statement with the bank’s stamp, banks charge statement fees from your account.
Remittance charges: Every bank will charge remittance fees for the remittances you make in other countries.
Account closure charges: When you close an account, you are charged the account closure fees.
Thus, understand the charges carefully before you open a bank account, whether current or savings.
Now, let’s summarise the differences between the current and savings account in the table below.
Since both types of accounts serve different purposes, they differ broadly in terms of features offered. While the current account is better for business owners and individuals willing to make frequent transactions, a savings account is for those who want to invest money and earn regular returns.
|Key Differentiator||Current Account||Savings Account|
|Purpose||To allow multiple transactions (withdrawal, payments, etc.) without any restriction||To secure the money deposited and provide interest on the amount deposited in the account|
|Overdraft Facility||Allowed||Not allowed|
|Minimum Balance||Requires higher minimum balance than savings account||Requires lower (sometimes zero) minimum balance|
|Interest||Not provided||Provided on the available balance|
|Transaction Frequency||No restriction||Restricted|
Although savings account offers interest income, the interest rate is relatively low because it is less risky than any other form of investment instrument. Thus, you can consider a savings account when storing your money and earning interest securely. At the same time, the current account will let you make regular and frequent transactions.
Make money transfers, pay bills, receive money, and perform many other transactions with Payit mobile wallet app.