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
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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%.