There are many different kinds of bank accounts, and anyone can open one at any local bank, regardless of whether the bank is public or private. Do you work for a company, own a business, or are you self-employed? You might be interested in opening a bank account or just curious about the various kinds of bank accounts.
You are most likely getting ready for government exams and looking for detailed information about the many sorts of bank accounts. You have come to the right place.
In light of this, let’s talk about the various kinds of bank accounts that anyone may open according to their needs in this article, regardless of whether that person is an individual or a company entity.
Different Types of Bank Accounts:
The general population and businesses are encouraged to open bank accounts by the banking institutions, regardless of whether they are public or private.
The following are the different kinds of bank accounts:
- Savings Account
- Salary Account
- No-Frill Zero Balance Account
- Current Account
- Fixed Deposit Account
- Domiciliary Account
- Recurring Deposit (RD) Account
Now let’s briefly understand each account’s features and benefits in brief.
1) Savings Account:
A savings account is the type of bank account that is opened the most frequently by customers of financial institutions so that they can take advantage of the most fundamental banking services. The savings account not only provides the account holder with the opportunity to earn interest on the money that is kept in the account, but it also instills in them the healthy habit of saving money.
There are no limits placed on the amount of money that can be deposited into your account because there are no restrictions on the number of deposits. Nevertheless, no limits are placed on the amount of money that can be withdrawn.
In addition, there are a number of additional distinct categories of savings accounts, such as those designated specifically for children, women, senior citizens, families, etc., amongst other categories.
The following is a rundown of the fundamental aspects of savings accounts:
- If you keep a balance in your account, you are eligible to receive interest, which is typically between 3 and 4% per annum.
- You will be issued a debit or ATM card that is associated with your account. With this card, you will be able to withdraw money at any time.
- You can also get a checkbook so that you can pay any person or party in whatever way you like.
- In addition, you will be able to use internet banking and mobile banking services, which will allow you to send money to anyone using your computer or mobile device.
- In addition, you will be notified through email and text message of any and all transactions that pertain to your bank account.
However, you must adhere to a set of requirements to use savings accounts.
- In order to avoid fees associated with maintaining a minimum level, you will need to keep a certain amount in your account at all times. Some banks will let you withdraw all of your money at once.
- To avail of the checkbook, you have to pay some charges to the bank.
- In order to make use of ATM services, you will be required to pay the ATM fees on an annual basis.
A salary account is a form of savings account that is opened on your behalf by your employer, regardless of whether that company is a government agency or a private equity firm. The accounts for the salaries are managed in the same manner as the regular savings accounts.
Your monthly salary and any reimbursements are exclusively deposited into the account designated for salaries. On the other hand, having a salary account carries a number of additional advantages. For instance, keeping a certain minimum balance amount is not required. This is because there is no such criterion.
Your employer will provide you with a letter demanding that you open a bank account in order for you to get set up with a salary account (generally in the desired bank or any other). You are required to take that letter with you when you go to the local (specified) bank, and the bank will open a salary account for you within the allotted amount of time.
There are instances in which the moment you start working for the company, your employer will initiate the opening of a paid account for you.
No-Frill Zero Balance Account
The labor force, farmers, women, and students who live in villages and remote areas were targeted to introduce the No-Frill accounts. This was done in order to provide essential banking services and various government schemes, such as MGNREGA, gas subsidies, KCC, pensions, and scholarships, amongst others.
A picture identification card and a photograph that is the size of a passport are required to open a No-Fee Account, which can be opened at any public or private bank, as well as at the customer service point (CSP) of any bank.
However, the use of such accounts does come with a few restrictions as well as a few benefits.
- You can’t withdraw an amount higher than, let’s say, 10,000 at a time.
- A checkbook facility is not available.
- There is no need for a minimum account balance with this type of account.
- You will get a Debit/ RuPay card for withdrawal.
- SMS Notification Services are Available.
- You can manage your account (money transfer, balance check, statement, etc.) through the mobile application.
2) Current Account:
Businesses, traders, cooperative societies, and firms are the most common types of organizations that establish and maintain current accounts.
This account was created to cater to the requirements of company owners who regularly engage in transactions involving third parties. It is distinct from a savings account in that cheques can be used to make withdrawals, making it feasible for a third party to take money out of the account. Once more, within the category of current accounts, financial institutions offer a variety of products that are designed to appeal to various types of clients. The opening amounts and running balances for these products might vary, but in general, they are greater than the balances associated with savings accounts.
Such accounts facilitate the frequent cashless transactions between two parties during the sale and purchase of products or services.
The account is open to use for both individuals and corporate bodies. The account comes with more perks than a savings account. For example, there is usually no limit to the number of monthly withdrawals, and the account can be used as a basis for accessing loans and other bank services. In fact, some banks have an SME current account product that is specifically tailored to suit entrepreneurs and their needs. With these extra perks come extra costs.
However, the criteria for maintaining a minimum balance amount are required to be met by account users.
In addition, the services offered to the account holders are:
- Cheque book facility
- Internet/mobile banking
- SMS Alerts
- ATM Service
- Overdraft facility (withdrawing surplus amount than what the balance is available)
However, you don’t earn any interest on the amount deposited into the current accounts.
To open a current account, you need to present the following documents.
- Proof that shows you are 18 or above
- Proof of Registration of Firm
- Certificate of concern authority (Regarding business)
- PAN Card of the firm
- Proof of Identity and Address (Proprietor)
- Proof of address (office or shop)
3) Fixed Deposit Account:
Fixed deposit accounts are ones in which you are required to deposit a single lump sum (defined) amount once for a fixed tenure, and depositors will also obtain a fixed rate of interest during the course of the fixed deposit account.
Until the maturity date, it is customarily forbidden to withdraw the money that was initially placed. However, some financial institutions permit early withdrawal; however, these institutions often give a lower interest rate.
The term of a fixed deposit account can be anything from seven days to ten years, and the interest rate that is often offered ranges from six to seven percent. However, this might vary from bank to bank. Senior citizens are eligible for an additional interest rate of 0.5 percent per year on their accounts.
4) Domiciliary Account:
This type of account allows its users to conduct business in two different currencies and is sometimes referred to as a foreign currency account (Naira and another foreign currency). On the other hand, the majority of banks exclusively offer transactions in dollars, euros, and pounds sterling. This form of account will most likely be suitable for businesses and other corporate entities, in addition to a few individuals that regularly engage in business transactions involving many currencies.
Domiciliary accounts allow for deposits to be made in any foreign currency of the account holder’s choosing, and there is typically no limit on the number of withdrawals that can be made from such accounts. Nevertheless, there is typically a set fee associated with each transaction. In addition, holders of this account will be liable to a service charge denominated in the foreign currency of their choice for any and all transfers made from banks located in other countries. In order to start a domiciliary account, you are required to provide passport photos, a utility bill, a valid means of identification, and a minimum opening amount, which varies depending on the bank and the foreign currency that you choose.
5) Recurring Deposit (RD) Account:
This type of account is not so popular. An account known as a recurring deposit account is one in which you are required to deposit a predetermined amount of money at regular intervals (such as once per month or once every three months) over the account’s duration in order to receive a higher interest rate. The amount of money could be as little as 50 rupees, and the duration could be anywhere from six months to ten years.
You are not allowed to change either the tenure or the amount that has been determined in between, or else there will be a penalty.
You will also receive an interest rate higher than that of a standard savings account and somewhere close to that of a fixed deposit, depending on the length of time you wish to invest your money. On the other hand, senior persons are rewarded with additional interest rates, which are normally around 0.5 percent.
In the case of RD accounts, an early withdrawal is usually not permitted, and if it is carried out, a penalty in the form of a lower interest rate will be imposed.
All of the common and important types of bank accounts that may be opened at commercial banks have been broken down and described in this article. I am hopeful that you have a complete understanding of all the important information regarding bank accounts that are managed by banks.