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HomeBusinessChoosing The Right Fit: Current Vs. Savings Account Differences And Their Impact

Choosing The Right Fit: Current Vs. Savings Account Differences And Their Impact

If you know anything about financial planning, you’ve probably heard these terms thrown around a lot current account and savings account—but what’s the difference between current and savings account? This decision might seem trivial, but it has far-reaching consequences on managing your money, business, and even how much you save in the long run. In this blog, we dive deep into this often confusing topic, offering you actionable advice and a comprehensive look at the varying impacts of each account type on your financial landscape.

Types of Transactions Allowed

Both savings and current accounts allow you to deposit and withdraw money, but that’s where the similarities end. While there are different types of current accounts, all of them are built for frequent, high-volume transactions and are generally used by businesses.

  • Deposit Flexibility: Current accounts often have no limit on the number of deposits you can make, unlike certain types of savings accounts.
  • Cheque Issuance: Current accounts offer unlimited cheque issuance, which is crucial for business transactions.

Now, let’s take Ravi’s example. He is a businessman who must make multiple daily transactions, issue cheques to vendors, and maintain liquidity. A savings account would restrict him due to transaction limits, making a current account the obvious choice.

Difference in Interest Rates

One of the most significant differences between current and savings accounts is the interest rate. Savings accounts offer interest on your savings, encouraging you to stash away more money.

  • Compound Interest: In a savings account, the power of compound interest works in your favour. Even a small deposit can grow substantially over the years.
  • Overdraft Facilities: A Financial Buffer This feature primarily pertains to types of current account. An overdraft facility allows account holders to withdraw more money than what’s actually in their account up to a certain limit.
  • Business Continuity: This is invaluable for business owners who may face short-term liquidity crunches but have bills or employee salaries to pay.

For example, if business owner Anil faces a delay in client payments but has to pay his employees, the overdraft facility in his current account can be a lifesaver.

Account Maintenance Fees and Other Charges

Both types of accounts come with their own sets of maintenance rules and fees, another crucial difference between current and savings accounts.

  • Minimum Balance: Savings accounts usually have a lower minimum balance requirement, but failure to maintain it incurs fees. Current accounts often require a higher minimum balance but offer more services in return.
  • Service Charges: Current accounts may have higher service charges due to the additional features they provide.

Impact on CIBIL Score

The way you maintain your account can impact your CIBIL score. A well-managed current or savings account can boost your creditworthiness, while mismanagement could be detrimental. Timely payment of any credit-related features in the account benefits your CIBIL score.

Tax Implications

Both current and savings accounts have different tax implications. Interest earned on savings accounts is taxable; however, a deduction is available on interest earned up to a certain limit under Section 80TTA of the Income Tax Act (old regime). On the other hand, current accounts do not earn interest, so there are no tax implications directly associated with them. However, business owners using current accounts need to consider the tax implications of their business transactions.

Online Banking Features

Online banking features may vary between current and savings accounts. Savings accounts usually offer standard online features like fund transfers, balance checks, and statement downloads. However, current accounts may offer additional features like multiple-user access, bulk payments, and trade services, which are essential for businesses in this digital age.

Differences in the Initial Account Opening Process

Opening a current account is usually more complex than opening a savings account. A current account may require more documents required for current account opening, including business-related documents, GST registration, and proof of business existence. In contrast, a savings account typically requires basic KYC documents like identity proof, address proof, and a photograph. Understanding these requirements beforehand can make the account opening process smoother.


Choosing between a current and savings account is more than just a toss-up. It requires a deep understanding of your financial needs, the frequency of your transactions, and even your long-term goals. Now that you know the types of savings and current accounts and the fundamental difference between current and savings accounts, making the right choice should be effortless.


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