When you visit the bank to open a new account, you have two choices, you could open a regular saving account or opt to open a current account. In the usual the language of banks the term “current” is intended for businesses. However, suppose you’re just starting your own company, and you are wondering whether you really need accounts with banks, don’t you? We are going to make the process more clear for you since here we’ll dive deep into the potential benefits and drawbacks of having an account that is current. If that’s what you’re looking to learn more about, continue reading and let’s get started.
Also Read: SWOT Meaning and Full Form – Advantages and Disadvantages
Advantages of Current Accounts
1. Unlimited Transactions
One of the major advantages of current accounts is the capacity to perform unlimited transactions throughout the day. In essence, this helps them in the course of their work due to the fact that they carry out the same high quality and consistency of transactions every day. The current account can make it easier to transfers of money, accepting of payments, and the management of cash withdrawals and cash deposits.
2. Flexible Deposit Options
A current account provides you with an at-home branch that has the ability to deposit without limit that is the primary concern of a company in massive cash transactions. There is no cap to be concerned about, which means you can make deposits as large as needed without worrying. Other branches, however, charge for deposits, but the overall effect allows for very flexible handling of money. This would be extremely beneficial for any company that has several locations, or if the business owner has a lot of time in travel for business reasons.
3. Overdraft Facilities
A majority of current accounts have an overdraft facility that acts as a financial security net when cash flow is low. In order to be able to draw funds, even with a zero balance, up to a limit in the event that there’s a glitch in your business at the time, and the company is a need to attend to finances or operations quickly. In essence, overdrafts are temporary loans that can be paid back when the financial condition improves.
4. Advanced Banking Services
Current accounts enable businesses to have access to advanced banking options that meet their requirements like mobile banking and online banking. The options to manage your accounts, performing the required transactions and monitoring the status of your business’s financials are accessible to you around the world via your phone or computer.
5. Designed for High-Volume Transactions
Absolutely, current accounts are specifically designed to accommodate large-scale transactions. They are the ideal choice for businesses that is of any size, regardless of whether it’s a huge corporate establishment or a smaller company that is nearing the point of expansion.
6. Cheque and Payment Facilities
Current accounts typically include ample cheque facilities, which constitute a significant aspect of business activities. They can be used for everything including paying suppliers for products or services, paying contractors to work, settling salaries for employees, as well as covering other related business payments. This is made possible through direct payment methods that include the NEFT system, RTGS, and IMPS in which invoices can be paid instantly and immediately.
7. Tailored for Liquidity and Security
Businesses and companies dealing with massive sums of money are likely to find that the current account is the most suitable option for securing the funds. It allows one to transfer money into the account and not hold it in physical form, thereby eliminating physical risk. Additionally it is liquid, which means that the user can take out his or cash at any time and at any time. This is crucial to be able to control a steady circulation of funds.
Disadvantages of Current Accounts
1. No Interest Earnings
Current accounts, in contrast to the savings account that is normally used for regular purposes, is not a good place to earn interest on balances that are maintained. This is a significant expense, particularly when large sums are kept within the accounts. In the case of businesses, this implies that the funds in the account aren’t producing any additional income This could be the case for any other investment choice, but with a current bank account the money is sitting there.
2. High Minimum Balance Requirements
The majority of current account companies on the market have a strict requirement for an amount of minimum funds. In this regard, it is a significant issue when it comes to managing the finances of small and medium-sized businesses and, especially for entrepreneurs, as any balance that is less than the amount can result in huge penalties, adding to financial burden. This requires careful balance management, which could distract from the other important business tasks.
3. Service Fees
However, current accounts have relatively large fees. They may include charges for checking books as well as account maintenance or processing of transactions. They can be unneeded overheads which can quickly add up and can result in a significant cost, particularly for companies that involve their bank accounts in a lot of transactions. It is important to be aware and manage these costs in order to maintain your financial health in good shape.
4. Operational Burdens
The most important factors that prevent many from opening a bank account is the sheer difficulty of the process required to register for it. It is a lot of paperwork, and all those conditions and terms, which could be a burden and laborious with lengthy documents and an in-depth understanding of bank policies and terms. This can divert your attention off of your main business tasks.
5. Limitations on Free Services
The current account may offer numerous benefits in banking, it typically is subject to limits in the amount of services that are free such as demand drafts, checkbooks and demand drafts. In excess of these limits, you will incur fees, significant increases to your operating budget. Without a the GST number, you are unable to create a new account.
Final Thoughts
You’ve got it. We have tried to explain the advantages and disadvantages of a present account using the most simple phrases so that you do not get in a hazy state and make a poor decision. With these benefits and drawbacks of a current account your disposal, you’re in a position to know what type of account would be the best fit for your personal needs and, most important, your business requirements.
