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Friday, 13 October 2017

Types of Bank Accounts

There are basically four different types of bank accounts. They are as follows-

1. Current Deposit Account - This account is generally meant for businessmen. This is because they have a high frequency of bank transactions. They usually have multiple transactions daily. Under this account, there is no restriction on the number of withdrawals and hence is most suitable for businessmen. No interest is paid by the banks on such accounts. Some current account holders are also given overdraft facility. An overdraft is like a temporary loan given to the customer to clear/honor cheques already issued by him (in case of insufficient balance in the current account of the customer). There is an upper limit on the amount of overdraft for each eligible customer which is decided by the bank itself based on the past record and the relationship of the customer with the bank.  The customer gets cheque book facility for current account  

2. Savings Deposit Account - This account is made for the general public especially salaried people. The main objective of having the savings account is to cultivate the habit of saving among people. Interest is also paid by the banks on the savings account. The interest rate is moderate (less than the rate of interest offered on recurring or fixed deposit account). However, there are restrictions on the number of withdrawals that can be made through savings account and hence this type of account is not suitable for businessmen. Customers are generally required to maintain a certain minimum balance in the account. Failure to maintain the minimum balance may result in minimum balance charge being deducted from the savings account. No overdraft facility is offered on a savings account. Saving account holders are given cheque book facility

3. Recurring Deposit Account - This type of an account is also called as the cumulative time deposit account. It is meant to cultivate the habit of savings among poor people. Under this type of an account, the customer is allowed to deposit a certain small but fixed amount (Rs.50, Rs.100, Rs.500 etc.) every month for a fixed period of time. The customer gets back the total amount deposited along with interest at the end of the specified period. This type of an account does not have the facility of withdrawal. The cheque book facility is not given to recurring deposit account holders. However, they do get a passbook which shows the amount deposited every month along with the interest amount for each month. 

4. Fixed Deposit Account - Under this type of account, a one-time lump-sum deposit is made by the customer for a fixed period of time (generally 3 months to 10 years). The customer cannot withdraw the amount during this period. However, he can take a temporary loan against the fixed deposit receipt (FDR). At the end of the fixed period, the customer can either withdraw the amount or renew the fixed deposit. The rate of interest offered under this account is highest among all the four main types of accounts. This type of an account does not have a passbook or cheque book facility. The customer gets a fixed deposit receipt (FDR) as a proof of the fixed deposit.

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