Banking Awareness is an important section from the exam point of view and if you are a banking aspirant then you must be knowing it that how much difference can this section bring to your total score. A lot of questions are asked from this topic along with current affairs as well as in some of the exams a separate section is dedicated to this topic in General awareness. In banking awareness, an important topic is the Types of Bank Accounts. Banking aspirants must have clarity on the types of accounts and their features. The types of accounts are the basic building blocks of the banking industry. There are several types of bank accounts offered by financial institutions to cater to different needs and preferences of individuals and businesses. In this article, we will be discussing Different Types of Bank Accounts & their features.
What is a Bank Account?
A ‘bank account’ can be referred to as suitable negotiation you happen to do with a bank to safeguard your hard-earned money in exchange for certain terms and conditions that vary on the choice you make under different types of bank accounts and also on the bank. Once you agree to the terms and conditions of the bank, it then keeps your money and provides you with an account number which functions as a reference number for all further transactions which you make as a customer of that bank. The bank also pays you interest on the money you keep safe with the bank.
List Of Different Types of Bank Accounts
Bank Accounts are mainly four different types. They are as given below:
1) Current Account
2) Savings Account
3) Recurring Deposit Account
4) Fixed Deposit Account
A ‘current account ‘ is mainly meant for businessmen, companies, firms, and public enterprises, as it is not suitable for those who want to invest or save for a longer time also no interest if paid in these types of accounts. There is no provision of interest being paid, on the money that is deposited in such accounts. A customer can deposit and withdraw his/her money any number of time in a day. The deposits which are made under these accounts can be termed as the most ‘liquid’ deposits, always being in the flow and operational also, the deposits in these accounts are more like a liability than an asset to the bank. Bank may charge a penalty if minimum balance is not maintained in a current account.
The saving account is the most popular and widely preferred deposit account by the bank customers who want to safeguard their money as well as wants to earn some interest on it. These types of bank accounts are like an asset to the bank because there is a limit on the number of transactions that can be made by a customer having these accounts and there is also limit on the amount per day that can be transacted. The rate of interest offered to savings accounts holders usually varies between 4% – 6 % and it also varies according to the bank.
Fixed deposits are more Popularly known as FD account, it is a type of financial instrument that is provided by banks which offers an even higher rate of interest on the deposits made by an account holder, as compared to a regular savings account, until the period of maturity. Fixed Deposit account can also be called ‘Term Deposits’ / Bonds. A customer deposits his/her money in these types of accounts for a fixed period and cannot withdraw it until the maturity period. If he/she withdraws the money before the maturity time-period then a fine is to be paid which varies bank to bank. The interest rate in a Fixed Deposit Account varies between 4% – 7.25% depending on the bank. The period of an FD can vary from 7 days to 10 years.
Recurring Deposits refers to an account that provides the facility of saving a small amount of money for a certain period and also earn a high-interest rate. the term ‘recurring’ basically indicates to something that occurs periodically or repeatedly. These types of accounts are more commonly known as RD accounts. It offers a fixed interest on the amount that has been already invested (through monthly installments) at a specific frequency and the same rates as applicable for Fixed Deposits (FDs). Any individual above 10 years of age is also eligible to open a recurring account along with a valid ID proof. The minimum amount can be 100 or can be even lesser than that. The interest rate offered on the recurring account usually varies in a range of 3.5% – 8.5% depending on the bank as well as it also varies according to the period of the deposit. The minimum time period for a deposit in this account can be 6 months and the maximum is 10 years. The period for a recurring account is classified into three types as given below:
- Short-term Tenure: The period usually ranges between 6 months to 1 year.
- Medium-term Tenure: The period usually ranges from more than 1 year to 5 years.
- Long-term Tenure: The period usually lasts from more than 5 years to 10 years.
How to open a Bank Account?
Given below is the process of opening a bank account which is easy and simple and can be summed up in a few steps:
- Research about the good banks and compare the facilities that it provide including the percentage of interest they offer.
- Choose a favorable bank as per your need.
- Visit the nearest branch of that bank and choose the type of account you want to open.
- Fill in your details carefully in the ‘account opening form’ provided by the bank officer.
- Attach a copy of valid ID proof with the form as asked by the bank.
- You will be required to produce an ‘introducer’ to open your account, wherein the introducer’s signature will be required on the form itself. This is done to safeguard the bank’s interest.
- Submit the carefully filled form along with all the required documents. The officer then will verify the information provided by you.
- Deposit the initial amount as required by the bank to activate the account. This amount may vary depending on the bank.
A passbook, checkbook and an ATM card will be issued as per the choices you tick in the form.