Personal and business finances can be daunting and confusing, and one of the most often asked questions is the most simple to answer: What is the difference between a savings and a current account?
The key differences are the rate of interest applied and the amount of access you have to your money. As current accounts are specifically designed to be a holding space for money, which will be used for everyday expenses and can be withdrawn through cash, standing orders, cheques or direct payment via a debit card, the rate of interest is significantly lower than that of a savings account, where banking customers are expected to leave money to accumulate.
These higher rates of interest often come at a price, and that is access to your money. For smaller savings accounts, or those with less money in them, there may be few or no restrictions: for those with significant sums in their savings, banks may require notification before money can be withdrawn. Businesses can access both forms of account similarly, but their differing requirements mean that many banks and building societies offer innovative solutions that will meet their needs.
Most current accounts allow bank customers to access their money through an ATM card, as well as online banking and, in some cases although this is being phased out, cheques. Many savings accounts also allow customers to withdraw money from ATMs, usually at a reduced rate, and they are also viewable on online banking, although the number of transactions and the scope of these varies. Cheques are not commonly linked to savings accounts; however, these are becoming an increasingly outdated mode of paying in the wider industry, and as such they matter less today than it they did in the past.
So, fundamentally, the difference is simply what the bank expects you to do with your account, and as such the restrictions it places onto it as a result, and the interest rate it offers. The best thing to do is always to speak to a financial advisor or member of banking staff about your options. Make sure those you go to for advice are impartial, and if not visit as many banks and building societies before you make your final choice. And remember: if you make the wrong choice, you’re not stuck with it- you can change banks, and with current and savings accounts there are usually no restrictions on when you can move.
So if you’re not happy with your interest rate or account terms, find yourself something better! There are plenty of great resources available for anyone looking for insight on how to move banks, among them CV Magazine. Make sure you subscribe to get the latest news, insight and information direct to your inbox so that you are always ahead of the pack and able to make informed decisions about your money and business.