A Current Account is usually opened by business entities in order to carry out their banking transactions. Being a zero-interest account, generally, businesses that deal with huge transactions on a regular basis use Current Accounts. However, a Current Account can be used for other entities as well.
In general, sole proprietors, freelancers and other people who work on their own tend to use their personal Savings Bank account for business transactions. However, this deprives them of the benefits associated with a Current Account.
Additional Reading: Advantages Of A Current Account
Here are 5 benefits of having a Current Account:
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Segregate business finance from personal finance
A freelancer or a sole proprietor is not a separate legal entity who is different from his business, unlike a company. But, this does not mean that the bank accounts should be treated the same way.
Opening a separate Current Account, in which business income and expenses are recorded, helps in bringing about a distinction between what pertains to the business and what pertains to the personal finance of the proprietor.
This not only helps in better financial planning on the personal front but also helps in portraying an exact picture of the business at any point in time. In some cases, when all the transactions are carried out in a single personal account, the proprietor may not be able to recognise that his business is running at a loss if his personal finances are healthy.
It is critical to segregate business finance from personal finance. And a Current Account can help with this.
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Professionalism in business
While dealing with business acquaintances, it is very important to maintain professionalism. This helps in enhancing your image and also in the growth of the business.
A Current Account in the name of your business is an important factor in achieving this. This is because the cheques you issue and receive will carry the name of your Current Account. Having a Current Account signifies your seriousness in carrying out your business.
Additional Reading: Know Your Cheque
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Ability to prove creditworthiness
Sometimes, your creditors and other lenders may want to check your creditworthiness before advancing credit to you. Operating a Current Account can help in facilitating this process.
You could give them a letter issued by your bank stating that you hold a Current Account. Alternately, interbank connections can help check creditworthiness too.
Sometimes, if you are into export/import, there is a need to issue a guarantee/letter of credit to foreign counterparties. Having a Current Account with a reputed bank helps in easing this process as well, thus helping in establishing your creditworthiness.
Additional Reading: How Your Credit Score Can Prove Your Credit Worthiness
BB Tip: Check your Credit Score for FREE by clicking this link |
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Overdraft facility
Another important benefit of having a Current Account is that one can easily avail overdraft facilities when needed. This means that the account holder can overdraw the balance in his account on a temporary basis, to plug any shortfall in funds.
This is, in essence, a short-term borrowing on which the bank may or may not levy interest. A normal savings bank account does not have the facility of overdraft. A Current Account can, therefore, help in meeting your need for funding in the short term.
Additional Reading: Joint Account Relationships And How To Operate Them
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Ease in banking transactions
A Current Account by its very nature offers added benefits when compared to a personal Savings Bank Account. With increasing competition, banks are now ready to offer value-added services at no extra cost to Current Account holders.
Banks prefer opening Current Accounts since these accounts do not pay the account holder any interest. As a result, features like 24 hours phone banking, doorstep banking, internet banking and mobile alert services come inbuilt with most Current Account kits.
In addition, the account holder can also enjoy a certain number of free pay orders/demand drafts and the facility to transfer funds instantly using NEFT/RTGS etc. Some banks offer a zero balance account as well, wherein there is no need to maintain a minimum balance.
Some of the services offered are free inward remittances, deposit, and withdrawals at any location, multi-location transfer, periodical statements and personal relationship managers to cater to your requirements.
While most of these services are also available with a Savings Account, it may require you to maintain a certain minimum balance. A Current Account helps in easy and quick banking transactions, which becomes very important while running a business.
Additional Reading: Avail Banking Services Using A Basic Mobile Phone
So, yes opening a Current Account has a ton of benefits. But, if you’re looking to explore other avenues then you must try some of our Fixed Deposit accounts. Our rates start from 7.49%.
I have a small business since last year.but currently I have no any current account. Kindly suggest which bank I prefer for current account.
Hi Yatin,
Thanks for writing to us. You will need to do a little bit of research on current accounts with different banks to understand which is the best account for you. Some banks offer an auto sweep-in facility which is useful for sweeping excess funds from your account into a Fixed Deposit account. Compare the features and benefits offered by each bank before you make a decision.
Cheers,
Team BankBazaar
Informative article on opening current accounts.
Hi Gaadikey,
Thanks for your valuable feedback. Please keep reading our blog for more.
Cheers,
Team BankBazaar
good information …
Hi Amit,
Thank you for your valuable feedback. Please keep reading our blog for more.
Cheers,
Team BankBazaar
Hi,
I am doctor and want to open current account for my clinic, do bank provide sweep machine facility
Hi Hemant,
Most banks provide a sweep-in facility for current accounts. Please get in touch with your bank for more details about this.
Cheers,
Team BankBazaar
can i open two recurring accounts with the same bank
Hi Anas, Yes. it is possible for you to open two recurring deposits with the same bank.
Hi team I am salaried person but I want to go for small scale business and I want to open current account and just would like to know what is the benefits of current account opening please suggest
Hi Sanjay prasad alli,
A Current Account lets you use the overdraft facility which is the most unique feature of this type of account. In this case, you can overdraw the balance in your account on a temporary basis to plug the shortfall in funds. This is because a Current Account is mainly used for business transactions. For all other benefits, please read through this article.
Cheers,
Team BankBazaar
Hi Team,
may i know, what are tax benefits for a sole proprietor in case of having a current account (business Account)?
As of my knowledge, I think while at proceeding ITR when need to consider the amount transaction had been made under current account only, need not to consider the personal accounts transaction.
Am i right? Please correct me if i’m wrong.
Such an enhanced information in this article regarding current account.
Hi Rahul Reddy,
There are no tax benefits for holding a current account. If you are filing an ITR for your business, you will be taking into account your business income and expenses.
Cheers,
Team BankBazaar
Hi Heena, We are a neutral finance marketplace and cannot suggest the name of any specific bank. Cheers, Team BankBazaar.
Hello.. If I use multiple bank accounts I have to pay more tax.. Is it applicable for savings account only or for current account as well? Will they consider my current account transactions as my income?
Hi Praveen,
Any bank account whether Savings or Current Account as long as it is linked to your PAN will be considered while deciding the quantum of tax that you will need to pay. Unless absolutely necessary, we suggest not having multiple bank accounts in the wake of growing bank transaction and maintenance charges.
Cheers,
Team BankBazaar
Nice amazing
Hi Vedhavarshini,
We’re glad you liked our post. Keep reading our blog for more insights into the world of finance.
Cheers,
Team BankBazaar
Thank you for the information about current bank account . It helped me to do my Math Project Work on Banking.
THANS A LOT !!!!
Hi Ayash,
We’re glad you find our blog really useful! Keep reading it for more insights into the world of finance.
Cheers,
Team BankBazaar
Thank you very very much.
I came to somethink new about Current Bank Account.
Thanks again !!!!
HAVE NICE DAY . . . . .
Hi Karunamoyee,
We’re glad you find our blog really useful! Keep reading it for more insights into the world of finance.
Cheers,
Team BankBazaar
Please Team BankBazaar,
What is the requirements for opening a tier 3 current account in the bank because i want to open one as soon as possible? And is this type of bank account for business transaction only?
I kindly wait patiently for your reply.
I give 5 star for your enliightment on this topic.Keep it up.
Hi Master Samwel,
The criteria for opening a current account differs from bank to bank. Please check with the bank that you’re planning to open a current account with regarding this.
Cheers,
Team BankBazaar