In this article, we’re exploring the difference between a current account and a savings account.
This will be particularly useful for anyone just getting started in banking and looking to better understand the specific benefits that they can access from different account types.
This article is part of our series on banking basics, ranging from opening different types of bank accounts around the world to understanding how various aspects of the banking system operate.
Feel free to use the table of contents to jump ahead to the sections most relevant to you.
Table of Contents
- Difference Between Current Account and Savings Account
- Should I Keep Money in a Current Account or a Savings Account?
- Features of Current Accounts
- Features of Savings Accounts
- Frequently Asked Questions
- Do You Want Help Opening Bank Accounts?
Difference Between a Current Account and a Savings Account?
The main difference between a current account and a savings account is that a current account is intended to support day-to-day transactions while a savings account is intended to encourage long-term savings.
Because of the underlying difference in the intended uses of current accounts and savings accounts, the specific features and benefits that they both offer vary significantly. This includes different account fees, interest rates, restrictions on withdrawals and deposits, and more.
For example, most current accounts do not offer interest, charge fees for maintenance, and have minimum deposit requirements. That said, current accounts also tend to be paired with a chequebook, have light restrictions on transactions, and include an ATM card.
On the other hand, savings tend to have more restrictions on withdrawals and transaction activities. However, they also tend to be free to open and have lower deposit requirements to get started.
But, again, it’s important to note that the main difference between current accounts and savings accounts is their intended use. With this in mind, when deciding between a current vs savings account, you should be reflecting on the specific services you require instead of conducting a comparison between account types.
Features of Current Accounts
The main features of current accounts include the fact that they support day-to-day transaction activities and have limited restrictions on account activity.
Here is a closer look at the features of current accounts:
- No (or very low) interest rates
- Unrestricted transaction activity
- Chequebook accompanying the account
- Debit card accompanying the account
- Access to overdraft protection
- Account access through online and mobile banking
- Ability to schedule direct debits and standing orders
- No fixed deposit requirements
- Minimum balance requirements
Current accounts are also used for depositing your annual income.
Features of Savings Accounts
The main features of savings accounts include the fact that they support long-term savings, tend to offer higher interest rates than current accounts, and generally have lower (or no) fees.
- Interest rates apply to deposits
- Restrictions on withdrawals and transactions
- No access to a chequebook
- No (or low) minimum balance requirements
- Access through online and mobile banking
- Withdrawals possible through ATMs
Should I Keep Money in a Current Account or a Savings Account?
The deciding factor on whether you should keep your money in a current account or a savings account is the reason why you are opening the account.
For example, if you are looking for an account that supports day-to-day transactions, then you should keep your money in a current account.
On the other hand, if you are looking to grow your savings goals, then you should keep your money in savings not easily accessible through current facilities.
That said, you can also choose to keep a portion of your money in a current facility and another portion of your money in savings.
By keeping your money in a current account and a savings account, you are able to continue supporting your day-to-day banking requirements. But, at the same time, you will be able to continue to focus on meeting your long-term savings goals.
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Frequently Asked Questions
Below are a few of the most common questions we receive from people looking into this topic. If you have further questions you would like to ask our team, don’t hesitate to get in touch.
Can a Current Account Be Used as a Savings Account?
Account holders can choose to maintain a balance in a current account just like they would in a savings account. However, there is limited benefit to using a current account this way since no interest will be earned on the balance.
What Is the Difference Between a Current and a Savings Account?
The main difference between a current account and a savings account is that a current account supports day-to-day transactions while a savings account supports long-term savings goals. As a result of these differences, specific features and benefits that are designed to support these goals are generally offered by each account respectively.
Should I Keep Money In a Savings or a Current Account?
Whether you should keep your money in a savings account or a current account ultimately depends on the type of banking activities you are looking to engage in. Transactional activity should be assigned to a current account while savings activities should be assigned to a savings account.
What Are the Disadvantages of a Current Account?
The main disadvantage of a current account is that it does not apply interest to the balance that is held in the account. As a result, the account will not earn interest over the time that the account is opened.
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