Salary Accounts vs Current Accounts: How are they different?
Author : Shreya Eppili | Published On : 29 Apr 2024
Whether you are a business person looking to steer your business in the right direction or a professional navigating the corporate world, you need to manage your finances effectively. To do this, you can choose from multiple Bank Accounts. Two important financial tools available are a Current Account and a Salary Account.
Each offers distinct perks and has unique characteristics. Understanding each account can, therefore, help you optimise your financial management.
Overview of a Current Account
A Current Account is a Deposit Account. It lets you carry out a significantly large number of transactions, including deposits, withdrawals, cheque issuance, etc. This account offers services designed for businesses and can be indispensable for efficiently and easily managing transactions related to your businesses.
This account can be operated from various locations, making it advantageous for businesses with a broad geographic footprint.
Overview of a Salary Account
A Salary Account is a kind of Savings Account where your employer deposits your salary. Hence, this account can be beneficial for salaried individuals. The account is usually linked to your payroll, and your salary is deposited directly into it. This way, you can access the funds immediately.
Differences
A Salary and a Current Account differ from each other in the following ways:
- A Salary Account is primarily designed for employees to receive their salaries. On the other hand, Current Accounts are used by entrepreneurs, traders, business persons, etc., to handle business expenses and high-volume transactions.
- Salary Accounts typically have no or very low minimum balance requirement. Current Accounts, on the other hand, have a higher minimum balance requirement than Salary Accounts.
- Whether you are a business owner or entrepreneur, you can easily open a Current Account online. Conversely, account holders of Salary Accounts are salaried individuals.
- Most Salary Accounts let you earn an interest. On the other hand, funds in a Current Account do not earn interest. This is because such an account is meant for business transactions.
- By opening a Current Account, you can take advantage of an overdraft facility. It lets you access credit even when your account balance is low. Afterwards, you can use these funds to cover the costs of your business needs. This feature can enable businesses to manage their cash flow effectively. Conversely, the overdraft facility is usually unavailable or is very limited for a Salary Account.
- You can convert your Salary Account into a Savings Account if no salary is deposited in it for a certain period. However, a Current Account usually stays the same.
Conclusion
Both a Salary and a Current Account offer various advantages. However, when deciding between the two, you need to understand your economic goals and activities. If you receive regular income through salary, a Salary Account might suit you. Alternatively, a Current Account can be suitable if you are a business owner or entrepreneur.
