Current accounts are one of the most common accounts offered by banks. They are used by businesses and entrepreneurs to conduct a large number of transactions on a daily/monthly basis. Current accounts possess certain features that make them suitable for this task. Let’s take a look at what is current account, how it works, and what are its specific features.
Features of Current Account
Unlimited Transactions: Current accounts allow holders to make an unlimited number of financial transactions. This differs from the service offered in a savings account. In a savings account, individuals can only make 3-5 monthly transactions. After this, they begin incurring additional fees to conduct transactions. Since current accounts have no limit on transactions, businesses can conduct a high volume of payments. For this reason, firms and businesses utilize current accounts, while individuals tend to use savings accounts. Understanding the SAC code full form can further streamline financial transactions for businesses.
Interest Rate: Since current accounts are used to conduct frequent transactions, they do not offer any interest rate. This is because current accounts are a tool for conducting business and are not an investment avenue. However, some banks offer a sweep-in facility, where surplus funds in a current account are transferred automatically to a savings account.
Overdraft Feature: One of the most attractive features of current account is the overdraft feature. Due to a large number of inflows and outflows in a business, current accounts offer an overdraft feature. It allows a company to make a payment when the funds are not there in the account. The account balance goes into negative until funds are added to the account. This is done to ensure that businesses can honour payments to be made. Since there can be time lags between inflows and outflows, this feature is useful for businesses.
How Current Accounts Help Businesses
We have already looked at some of how current accounts can help businesses. They allow businesses to operate smoothly by offering unlimited transactions and an overdraft feature. However, there are even more ways that current accounts help businesses. These are:
Helps Owners Separate Personal Assets from Business Assets: As a business owner, it is important to keep your personal and business assets separate. It allows for better planning and managing of financial budgets. Segregating personal and business assets helps businesses organise their data, which can be useful for taxes and deductions. Hence, maintaining a current account for business operations is a great way for companies to operate smoothly.
Signifies Business Legitimacy: Having a current account opened in the name of your business offers your business legitimacy. It can boost business and your company’s reputation. It allows for better representation and branding, which helps establish trust for recurring or new clients.
Extra Benefits: Your bank will likely offer you extra benefits with your current account. For example, some banks offer services like free Demand Drafts, NEFT, and RTGS transactions.
Read Also: What Is Turnover in Business?
CONCLUSION:
Now you know what a current account is and what the features of a current account are. If you are someone planning to open a business or start-up, then getting a current account would be wise. It can help you conduct business smoothly and keep all your finances organised. However, if you are an individual who is looking to earn/invest money, a savings account would be best for you.