In this part of the world, we usually don’t pay attention to the different kind of account available for us to choose from. At most, we all assume that a savings account is for savings and that a current account is an exclusive reserve for those that have lots of money. But, quite frankly, there are more to these accounts than you know. So, let’s talk about that for a bit. Shall we?
Current Account
A current account is a deposit account held at a financial institution that allows withdrawals and deposits. This type of account is very liquid and can be accessed using cheques, automated teller machines (ATMs) and electronic debits, among other methods. A current account differs from other account types in that it allows numerous withdrawals and unlimited deposits, whereas savings accounts sometimes limit both. Current accounts can include business accounts, student accounts and joint accounts.
Savings Account
A savings account is an interest-earning deposit account held at a bank. This type of account usually pays a modest interest; it is a great option for keeping cash you want available for short-term needs. Savings accounts have some limitations on how often you can withdraw funds, but generally offer flexibility that’s perfect for building an emergency fund or saving for goals such as rent, school fees or buying a car. Money kept in this account usually earns interest, whose rate is determined by the account type.
What is the Difference Between Savings Account and Current Account?
Let’s compare savings and current accounts under 4 ideas: compatibility for desired used, interest receivable, overdraft and minimum balance.
1. Compatibility: A savings account is most suitable for people who are salaried employees, have a monthly income or want to save money. Conversely, current accounts work best for individuals, business persons and entrepreneurs who need to access their funds frequently. Current accounts are suitable for frequent transactions.
2. Interest Rate: Savings accounts earn interest at one-figure rates, depending on the type of savings account while current accounts earn no interest. A current account is actually a no interest-bearing deposit account. With savings accounts, banks offer interest to encourage customers to save. Current accounts are focused on money flows, so no interest is offered.
3. Overdrawing: When you withdraw more money from your account, than is actually there, that account is said to be overdrawn. Banks do not offer or allow overdraft facilities for savings account but this facility is provided with a current account. Overdraft facilities are made available to current account holders to ease any temporary cash flow issues.
4. Minimum balance: Some savings accounts and most current accounts require a minimum balance to be maintained. The minimum balance required to maintain a savings account is usually low (₦1000-₦2000) or waived depending on the financial institution but the minimum balance for a current account it is much higher in comparison.
There are different incentives to owing one or both types of accounts, the categories explained above will help you choose which account works for your account opening objective. To open a UBA account today, click here.
Read Also: Bank Account Opening Requirements in Nigeria
