Different types of bank accounts
Bank accounts are typical traditional products maintained for the customer by recording all the financial transactions between the customer and the bank and between the customer and others through the bank. A banking transaction results change in the status of the account of the customer with the bank.
There are two types of bank account products namely the credit balance account or simply deposit account where the customer parks his money with the bank. In the debit balance account the bank lends money to the customer in the form of a loan and such account is known as a loan account.
Various types of bank deposit accounts include, Saving Account, Current Account, Recurring Deposit Account and Fixed deposit account. In the debit balance accounts, the home loan account, vehicle loan account and personal loan account are very commonly used by individuals.
A current account is a very typical business account meant for transacting business without any cap on the number transactions. These are generally meant for firms/ companies although there is no restriction on an individual opening it. Banks does not offer interest on current account deposits but levies charges on certain services. The business firms open current accounts to make all their transactions transparent through the cheques routed through their banks.
Originally started as a method for saving precious earnings with flexibility, the saving accounts have come long way the individuals transact their money. With the introduction of ATMs the face of savings accounts has changed forever. Today savings accounts have become mandatory for almost everyone especially for the salaried class for drawing their salaries. In contrast to the current accounts saving accounts offer a token 4% interest on the savings deposits. The cheque facility is given with a cap on number of transactions per day to prevent its use as current account. Some of the services offered on a savings account are chargeable. With effect from the financial year 2012-2013, the interest accrued from savings account to an extent of INR 10000/- is exempted from income tax. With revised guidelines from RBI from October 25, 2011, the savings accounts are now deregulated and banks are free to offer higher interest rates within the permissible limits.
Recurring Deposit (RD) Account
As saving is a habit of any earning person, RD accounts have emerged as one of the primary saving methods in the current monetary fluctuation times. A fixed sum of rupees is saved every month either by direct cash deposit into the RD account, through the cheque or by standing instruction to the bank. In the normal circumstances the account holder cannot withdraw money from the account until its maturity. It is best suited for children education, marriage or for buying consumer durables without loans. Banks offer higher rate of interest on RD accounts than savings account. With liberal RBI guidelines, banks have introduced a variety of RD account products suiting the needs of different customers.
Fixed Deposits Accounts
These are slightly different from traditional bank accounts where in customers park their funds for a fixed period at higher interest rates. At the end the customers receive the sum along with accrued interest.
Debit balance accounts
Home loan accounts, vehicle loan accounts and personal loan accounts form the popular category for individuals. Generally all these accounts have similar features such as regular credit from the customer in the form EMIs. They are usually connected to the salary savings account of the individuals from where the credit is drawn for the loan account either through the ‘standing instruction’ or through the electronic clearance. Different loan accounts carry different interest rates with personal loans attract higher interest and housing loans carry very competitive interest rates attracting customers to buy houses/ flats.
Over the years banks have evolved innovative products combing features of two or more deposits accounts. These products cater to the specific requirements of customers and are less popular than traditional bank accounts. For example, 2-in-deposit account combines fixed deposit features with savings account and 3-in-1 trading account etc., combines the savings account with demat account and trading account connected with shares transactions online. Banks are striving to make banking user friendly with many features such as net banking, tax payments and automatic bill payments from the banking accounts. Banks want lesser foot falls in to their branches by automating many transactions through the banking accounts.