This article covers the following:
The meaning of current account with a bank.
- Account advantages.
- Current Account disadvantages.
- The meaning of current account with a bank.
Current bank accounts are commonly used by companies, organizations, public enterprises, businessmen who transact regularly with the bank. The current account activities entail deposits, withdrawals, and contra transactions. This accounts are also known as Demand Deposit Account.
Current accounts are opened in most of the commercial banks with ease. This type of account is associated with large and several transactions since it’s a zero-account. No interest is earned in this account as it is fluid in nature. They also usually do not have any limit on transactions which can be made.
- Advantages of Current Account
- Systematic payments of receipts in large amounts is allowed.
- No limits on withdrawals under these accounts, as long as its in line with the levied cash transaction fees.
- Accounts opened in the home branch banks have zero restrictions on deposits. Cash deposit through other branches by the account holders are also allowed as long as the required imposed fee is paid.
- Creditors can be paid using various methods like cheque, pay-orders, demand drafts etc through the current account.
- Overdraft facilities are provided to current account holders.
- Small interest earnings imposed on the account balance attracts many users.
- Further advantages are awarded to businesses such as; any location withdrawals and deposits, free inward remittances, multi-location transfers etc.
- Business men are allowed to withdraw with no limits from the current accounts, in accordance to banking cash transaction tax, if levied by the government.
- The interbank connections enable creditor’s access to credit-worthiness information of the current account holders.
- Country’s economy is boosted. Without this account many businesses would not be running effectively.
- Mobile and internet banking are available hence convenient for prompt business transactions.
- Other advantages include:
- Any location deposit and withdrawal of cash.
- Transfer of Funds in multi-location.
Disadvantages of a Current Account
- Opportunity cost of loosing interest is high due to the zero interest rates on money in the current account.
- Additional costs on services offered are a burden to businessmen.
- A lot of paper work and fine print is involved thus can be confusing.
- Corporate business transaction has huge fees.
- Limits are imposed on withdrawals in a day.
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