Today we’re gonna talk about the basics of a bank account or types of a bank account. If you’re the kind of person who doesn’t know what is current and savings accounts, what are the difference between them?
Well, that’s totally fine. Because now I’m going to explain to you what are the type of deposit accounts and what type of account you should use in a specific situation in the simplest way possible.
So here we go, there are generally 4 types of deposit accounts in banks.
1. Current account
A current account is not used by a common person. It is generally used by businesses, firms, companies, enterprises, etc, for transaction purposes. In this type of account, there’s no limit over the number and amount of transactions or deposits.
Generally, transactions are free over a specific limit and after that, the bank will charge a small amount over every transaction which varies from bank to bank.
In this type of account, banks will pay you no interest over your money because of the lack of stability of money in the account. You can deposit or withdraw any amount of money whenever and wherever you want. And if you deposit money in any branch other than your home branch there will be small fees charged by the bank.
3. Saving account
This is the most common type of account used by people in India. Nowadays everyone has at least one saving account thanks to “Jan Dhan Yojana” .you can also open a zero balance account in some private banks but there are some banks who sets limit like you have to have some amount of money in your account otherwise they’ll charge a small amount of penalty. If you’re a student I would recommend you to have a zero balance saving account.
When you open a saving account in a bank, they provide you debit card by which you can withdraw your money wherever and whenever you want, you can do online shopping and many other purchases.
So now you know, it is popular because of its convenience factors. saving account is the most used account by common people because of its liquidity. It also pays interest over your money. It pays generally 3-4 percent of interest per anum. And you can withdraw or deposit whenever you want.
You can use a high yield saving account for saving purposes because it provides more interest than normal saving accounts. And your money is also safe.
3. Recurring account
In recurring accounts, there’s a certain amount of money paid monthly for a specific time period and when it gets mature the bank will pay you not only the entire principal amount but also the interest on that amount for that time period. The interest depends upon the amount of money and how long you held that money ( your tenure period). The tenure of the RD account varies from 6 months to 10 years.
You can’t withdraw money before its maturity and if you have to withdraw in case of emergency, the bank will charge a 1-2% penalty over your interest rate on your accrued amount for the period the money was in the bank. There are many rules over withdrawal before maturity varies from bank to bank.
Suppose you want to buy a laptop which costs 40-50 k and you want to save money for that. So you open an RD account which provides interest rate 5-6 percent, and you deposit a small amount every month from your part-time job or from your pocket money which creates a saving discipline and since you can’t withdraw so you’re less likely to spend it.
And the important thing is that you don’t have to put a wholesome amount in once like Fd but you’ll get interested like Fd.
4. Fixed deposit account
When you open a Fixed deposit or FD accounts it means you have to give a lump sum amount of money to a bank in once for a specific period of time. The tenure period varies from 7 days to 10 years. FD pays you around 6-7 % of interest per anum.
Fixed deposit means once you put your money in that account you can’t withdraw it before maturity according to the RBI rules if you do so in case of the emergency bank will charge you a penalty of 0.5 to 1% over your interest rate.
FD is best for the type of person who wants to keep his money safe, doesn’t want to mess his head up with different investment strategies, don’t want to take a risk, and also don’t want to lose the value of their money by inflation keeping in a savings account.