Different Types of Bank Accounts
What is a current account? Current Account is primarily meant for businessmen, firms, companies, and public enterprises etc. that have numerous daily banking transactions. Current Accounts are cheque operated accounts meant neither for the purpose of earning interest nor for the purpose of savings but only for convenience of business hence they are non-interest bearing accounts. In a Current Account, a customer can deposit any amount of money any number of times. He can also withdraw any amount as many times as he wants, as long as he has funds to his credit.
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Generally, a higher minimum balance as compared to Savings Account is required to be maintained in Current account. As per RBI directive banks are not allowed to pay any interest on the balances maintained in Current accounts. However, in case of death of the account holder his legal heirs are paid interest at the rates applicable to Savings bank deposit from the date of death till the date of settlement. Because of the large number of transactions in the account and volatile nature of balances maintained, banks usually levy certain service charges for operating a current account.
Current Account can be opened by: •An individual who has attained majority. •Two or more individuals in their joint names. •Sole proprietorship concerns. •Partnership concerns. •Hindu Undivided Family (HUF). •Limited Companies. •Clubs, Societies. •Trusts, Executors and Administrators. •Others – Govt. and semi Govt. bodies, local authorities etc. Requirements to apply for Current Account For Individual, Joint: Following papers / documents are to be required for opening an account in the Individual / Joint name:- 2 (Two) passport size photographs duly attested by the introducer •Passport / Identify card / Employer’s certificate / Word commissioner certificate •Introducer For Proprietorship: Following papers / documents are to be required for opening an account in the Proprietorship name:- •Introducer who maintaining an A/C with this Branch •2 (Two) passport size photographs in each name duly attested by the introducer •Valid Passport / Identify card (For Defense personnel) / Word commissioner certificate in each name. •Initial deposit minimum 500/-for opening a new A/C •Declaration of Proprietorship Trade license from Municipality •TIN(Tax Identification Number) & VAT(Value Added Tax) Certificate •Mandate if operation by 3rd party is to be allowed. •Account agreement form For Partnership: Following papers / documents are to be required for opening an account in the Partnership name:- •Introducer who is maintaining an A/C with this Branch •2 (Two) passport size photographs in each name duly attested by the introducer •Valid Passport / Identify card (For Defense personnel) / Employer’s certificate / Word commissioner certificate in each name •Initial deposit minimum 500/-for opening a new A/C Photocopy of partnership deed registered with registrar of firm duly attested by notary public •Trade license from municipality •TIN & VAT certificate •Photocopy of registration certificate duly attested by Notary Public in case of registered firm •Account agreement form •Letter of partnership duly signed by all the partners, in case of non-registered firm •Resolution signed by all the partners to open the A/C For Club, Society, Trust, Autonomous Body, Govt. Depts. , Directorate, Hindu Undivided Family, etc: Following papers / documents are to be required for opening an account Photocopy of Registration certificate certified by Chairman/Secretary •Copy of constitution/ Bye Laws of the Club/ Society/ Association duly certified by Chairman/ Secretary. Certified copy should also be verified with the original by concerned Bank Officials under seal and signature •Resolution of the managing committee/ Executive Committee authorizing opening the A/C with the Bank naming the persons who will operate the A/C •List of Members of Managing Committee/ Executive Committee duly certified by Chairman/ Secretary. Features of current account:
The large majority of current accounts will include these basic features: •Cash or Debit Card – This handy card can be used to withdraw money or check the balance on your account through a large cash machine network. Since cash machines never close, the cash card offers you the ability to withdraw funds any time of the day or night. Debit cards can also be used to make purchases from retailers. •Direct Debits – Direct debits offer the ultimate convenience for those regular payments with which you have to grapple. Instead of dealing with late fees because you forgot to pay your mobile phone bill (again! , you can set up payments so the money is automatically taken out of your account at the same time each month. •Checkbook – In addition to a cash or debit card, most current accounts come with a checkbook. However, account holders must be at least 18 years of age to enjoy this feature. The checkbook allows you even more option for making purchases and paying bills. In addition to the basics, many banks offer a variety of additional options so that their current accounts can effectively compete with other financial institutions. These features may include: Online or Telephone Banking – Most bank customers today don’t want to have to limit their bank business to standard office hours. Internet banking can be done at a time that is convenient for you, right from the comfort of home. Many companies also offer 24-hour phone service, so you can talk to a live person about your account if you prefer. •Overdraft Facility – This addition to your current account protects you from accidental overdrafts. When you write a check for more than you have in your account, the overdraft kicks in to cover your debit. You can pay the overdraft back in full or in minimum monthly payments.
The specific limit and terms of the overdraft will vary from bank to bank. •Interest – Some current accounts actually pay you interest on your money, even though this is not technically classified as a “savings” account. Interest rates vary greatly, so if this is an important feature for you, shop around for the best rate possible. •Post Office Branches – Some banks offer branches within post offices, adding to the convenience of your banking experience. If the bank or building society you choose doesn’t have a brick and mortar branch near your home, find out if they have post office branches that might offer more convenient locations.
Advantages of a current account: Current account has many advantages more than you could imagine. This account can serve you in many ways and can make your every transaction very convenient and fast. Here are the advantages: •There are many reasons that every business should have a checking account; the biggest reason is that you need to hold your money in a secure location. Furthermore, a current account tells your employees and other businesses that you are serious about doing business. In fact, doing business without a current account may lead others to wonder about the legitimacy of your business. Also, a checking account will open doors to lines of credit financing that are not available to businesses that do not have a checking account. •The next benefit is that you won’t have to carry around large amounts of cash whenever you perform a transaction, as you will rather get a debit card that lets you pay for things wherever the merchant is accepted. •Another good thing is that many now come with online banking too so you can manage, track and check on your money online making it really convenient and easy to see what you have and where it is. Another advantage is telephone banking, access to a huge network of branches at which you can make transactions and more. •One of the most important advantage f the current account is the overdraft facility which prevents you from incurring the bouncing of cheques. •Other advantages of a current account are that it has no limits on the number of transaction; salaries can be deposited in this type of account, etc. Disadvantages of a current account: There are of course disadvantages to having a business account, which you may want to think about before you get one. Generally your interest rates will be lower than with a personal savings account. To offset this, you can open a savings account under your business name. •Sometimes a credit check will be done before you get a business account, which means if you have poor credit you may not be able to get the bank account. There are definitely advantages and disadvantages to having a current account for your business. However, it seems the advantages far outweigh the disadvantages as it has become increasingly necessary to have a current account if you want to do business, especially an online business.