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Why Having a Current Account is Important?
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Disclaimer: This Article is for information purposes only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. The Bank makes no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Article. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from the Bank. The Bank, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein. Tax laws are subject to amendment from time to time. The above information is for general understanding and reference. This is not legal advice or tax advice, and users are advised to consult their tax advisors before making any decision or taking any action.
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A current account is a bank account used by businesses who need to carry a high number of regular transactions easily. Three huge distinctions between a current and a savings account are that the former is a zero-interest account, provides exclusive solutions like PoS (Point of Sale) and use of QR code for businesses, and banks do not limit the number of daily transactions.
Let’s look at three reasons why businesses prefer Current accounts over Savings accounts:
Specially Crafted Services for Current Accounts
A business is always dealing with a lot of different stakeholders which involve money. This means that all financial transactions need to be quick, easy, and without any hiccups.
Hence, banks offer current accounts many different services like access to personal relationship managers, large deposits and withdrawals at any location, free inward remittances, and a certain number of free demand drafts and pay orders.
Businesses can also benefit from current account overdraft facility. This means that when a business requires extra funds, they can withdraw more money than what is available in their account up to a specific limit. Banks may levy a small percentage of interest on this withdrawal.
Separating Business Transactions
It is always advisable to have a separate savings account for your personal finances and a current account for your business transactions. A separate current account will begin to give you a clearer picture of the profits and losses in your business. That will help you take the necessary decisions to steer the business in a particular direction.
A separate savings account helps you manage your home finances better, have room for family or medical emergencies and plan investments too.
Additional Read: The importance of a Current Account for Freelancers
Business Professionalism
Handing a visiting card or a business card puts you in a certain league or establishes an absolute seriousness around you in front of your associates or stakeholders. The same way, a current account for your business transactions makes your associates think that you value your business with a certain seriousness.
A current account helps you in establishing more credibility, eventually more business, all contributing to the growth and goodwill of your business. Additionally, your transactions, whether they are through net banking or via cheques or demand drafts when done through your current account, give the impression of clear and distinguished business transactions.
It also helps one in establishing their creditworthiness in front of their business counterparts.
Being aware of these reasons helps people choose over the right kind of account and make use of the advantages that come with having a current account.
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