A current account is a financial account with a bank or a financial institution. It enables account holders
to make or receive an unlimited number of payments as frequently as they wish. Thus, current accounts are considered as an
essential tool for businessmen.
How Current Accounts Work
Employers often transfer wages directly into the current account. Current accounts provide the facility to make direct payments
for bills, rent and mortgage. There are two ways in which a current account holder can do this:
Standing Order: If one instructs the bank in which s/he holds a current account to make a monthly payment of a fixed amount
to a particular person, it is known as a standing order. Account holders can also change the amount by intimating the financial
institution or bank.
Direct Debit: When customers instruct their banks to pay an amount (that is not fixed) to a particular person, it is known as a
direct debit. The party that has to withdraw the payment can do so by informing the account holder.
Benefits of Current Account
Holding a current account has the following advantages:
- Interest earnings on balance.
- Faster and trouble-free access to cash.
- Electronic payment.
- Checkbook facility for non-cash payments.
- Overdraft facility.
- Management of usual payments like wages and expenses.
- Online management of money.
- No need to exchange money while one is abroad.
- No need to carry cash in bulk.
- Provision of statement under money management facility.
Drawbacks of Current Account
Here are some of the disadvantages of a current account:
- The rate of interest that one earns on the balance is very low.
- Services of package accounts have additional costs.
- Fine print and paperwork can be lengthy and perplexing.
- Corporate businesses can be charged huge fees.
- Losing the card can restrict one’s access to cash.
- A limit may be imposed on the amount of funds one can withdraw in a day.
When opting for a current account, one should aim at getting competitive interest rates, low interest overdrafts and
preferential offers on loans.