Bank Current Account - Meaning, Advantages and Disadvantages

Current bank accounts are very popular among companies, firms, public enterprises, businessmen who generally have higher numbers of regular transactions with the bank. The current account includes deposits, withdrawals, and contra transactions. Such accounts are also called the Demand Deposit Account.

What is meant by a Current Account with a bank?

Current bank accounts are very popular among companies, firms, public enterprises, businessmen who generally have higher number of regular transactions with the bank. The current account includes deposits, withdrawals, and contra transactions. Such accounts are also called the Demand Deposit Account. A Current account can be opened in most of the commercial banks. A current account being a zero-account, is generally associated with huge transactions on a regular basis. Because of the fluidity that these accounts offer, they don’t earn any interest. These also usually do not carry a limit on the number of transactions which can be made.

Advantages of having a Current Account

• Current accounts allow handling of large volumes of receipts and/or payments systematically
• Under these accounts, limitless withdrawals are allowed in line with the levied cash transaction fees.
• There are no restrictions applied on the deposits made into the current accounts opened at the bank’s home branch. Additionally, account holders can also deposit cash at other branches upon paying small fees as applicable.
• Cheques, pay-orders, or demand-drafts can be issued via a current account for making direct payments to creditors.
• Overdraft facilities are also available for current account holders.
• The presence of small interest earnings on account balance makes a current account all the more attractive for its users.
• Businesses are further advantaged with various other benefits in the form of free inward remittances, deposit and withdrawals at any location, multi-location transfer etc.
• The businessmen can withdraw from their current accounts without any limit, subject to banking cash transaction tax, if any levied by the government.
• Assists creditors of the account holder who can have access to information on the account holder’s credit-worthiness through inter-bank connection.
• It facilitates the industrial progress of the country. Without its help, businessmen would face difficulties in running their businesses.
• Provides with Internet-banking and mobile-banking to enable businessmen carry out important business transactions promptly and with ease.
• It also provides various other advantages (benefits) such as:
  • Deposit and withdrawal of money (cash) at any location.
  • Multi-location funds transfer.

Disadvantages of having a Current Account

• There is an opportunity cost of losing on the interest rates due to low or zero interest on money in current account.
• There is an operational burden attached since most package accounts offer services at additional costs.
• The involved paperwork and fine print serves to be lengthy and confusing.
• Huge fees due to corporate business transactions.
• There is a limit on the amount of funds that can be withdrawn in a day.