A deposit account maintained with a bank, for supporting frequent money transactions is known as the current account. Facilities such as transfers, overdraft facility, direct debits, no limits on the number of withdrawals and deposits, internet banking, etc will be provided in the business current bank account. The current account is perfect for the business entity’s, government department, societies, institution, etc. Many things are taken into consideration before choosing the business’s current bank account for a business, such as minimum balance required, maintenance fee, overdraft facilities, and many more which will be discussed in detail in this article. In short, by reading this article you will get proper knowledge about how to choose business current bank accounts and tips to choose the business current accounts.
After opening a current account you can deposit any cash in it for example if you have done any sales, you can deposit the sales money in the current account, if you have taken a loan the loan money, can also be deposited in your account. Because of that, you didn’t need to handle the cash and additionally, you get the security of the bank and many more facilities which will explain in this article.
About Current Account and its Features
A deposit account held with a bank to manage your business transaction is known as a current account. So if you have any business, you should undoubtedly go for the current account compare to a savings account. So mention below features of the current account will help you to choose the best business account and also helps to understand the tips to choose the business’s current account.
- In the current account, the interest rate is 0% however, the bank will give no interest in your deposit money.
- A minimum amount of balance is required every monthly or quarterly basis, depending on the bank. If you want more facility then the bank will tell you to maintain a high minimum balance. It is generally between Rs 10000 – 30000 depending on the bank and facility you want.
- Unlimited transactions per day without any extra charges such as transfer funds receive cheques, cash, etc.
- General facilities such as a checkbook, ATM/Debit card.
- Online banking such as bank transfer through NEFT/RTGS/IMPS.
- Overdraft facility up to set limits.
- You will get free cash deposits and withdrawals up to specific limits.
- You have to pay extra charges for many services such as cheque bounce, minimum balance requirement, duplicate statement, remittances – demand draft, RTGS/NEFT/IMPS, etc.
The basic difference between the Current Account and Savings Account
|Basis for difference||Savings account||Current account|
|Meaning||It is an account made for individual, who wants to save money||It is an account made for business, who have to do transaction on daily basis|
|Objective||To encourage savings of a person||To support transaction on daily basis|
|Suitable for||Individual||Business or company|
|Minimum balance required||Less||More|
Current Account – Pros and Cons
- Higher security as compare to cash
- Business-friendly – Ultimate transaction per day
- Overdraft facility up to the preset limit
- Easy to operate – cash, cheques, cards, online banking
- No interest on deposit
- Minimum balance requirement
Tips to choose a Business Current Account
Now that you are familiar with the current account and its features let’s talk about the factor you should consider before choosing a business current account. These are the tips to choose the business current account you should keep in mind while opening a current account for business.
Consider a Bank with Foreign Branches
In case your business has foreign clients, it is advisable to open an account in a branch which has branches abroad and offers foreign trade service. In that case, it will become easy for you to pay or receive payments from foreign clients.
Working capital, Trade finance and Speedy clearance facility
Look for working capital assistance in case of a manufacturing business, the working capital will show you the financial strength of that bank. Also, trade finance services for trading companies, trade finance can help to buy more goods and negotiate discounts. In addition to this, a speedy clearance facility for service business.
Minimum Balance Requirement (Key feature to choose current account)
You should know about the minimum balance requirement for the account. Because different banks have different minimum balance requirements. As you are starting your new business and you didn’t know about your monthly income. In this case, choose the bank which has a minimum balance requirement low. Besides this, if you failed to maintain minimum balance requirement the bank will charge you Rs 500 – 1000 for non-maintenance of your account.
Maintenance fees (Key feature to choose current account)
You should know the maintenance fees taken by the bank for debit cards, credit cards, checkbooks. Because some banks charge high maintenance fees compare to the normal fees. And with all these, you should also know that, is there any transaction charges and if yes. How much will the bank charge you for how much transaction?
Check whether the bank is giving you the credit facility or not. When your balance sheet is good and you are doing your transaction daily and have a good relationship with the bank. And suddenly you require a short term loan for your business, in this case, if the bank gives you the loan on short term notice, the loan given by the bank is known as a credit facility.
Online Banking Service (Key feature to choose current account)
This is the most important feature you should check before choosing a business account. For example, if you want to do the online transactions and when you open the payment gateway, there is no option of your bank so you can not do the payment. Along with this, you also need to see that the bank is providing online banking services such as balance inquiry, transaction history, online shopping, withdrawal and deposit through the third party, view account statement, etc. This will not overlap your business transaction, otherwise, it will create problems in your business.
Cash Deposit Facility
If you have the cash-centric business were all your payment you receive are coming in cash in this case, go for an account with high daily and monthly deposit limits. Also, the maximum cash deposit limit is kept 40 lakh per annum by the government. Therefore if you deposit more than 40 lakh cash, in that case, the bank will give this information to the income tax department.
Cheque Clearing Services
If you do all your business in a cheque, for example, you receive or give payments in cheque then undoubtedly, choose a current account that has the fastest cheque clearing service. It should offer a higher limit of force cheque leaves per quarter, in case your business is more in the cheque.
Open your current account with a bank, which has a well-integrated payment acceptance infrastructure and provides a credible and effective payment collection service.
Overdrafts and Loans Facility (Key feature to choose current account)
Scout for a current account where you can easily avail of loans and overdrafts facilities when your business grows. And how much will the bank charge interest on it? An overdraft facility is a facility in which the bank gives you some credit facility. For example, if your minimum balance is Rs 4000 and if you have to give payment of Rs 20000 to someone. In that case, you can give the cheque of Rs 20000 to them and the remaining Rs 16000 will be paid by the bank on behalf of you and consequently will charge some interest from you.
Before choosing a current account for business compare the interest rate for the overdraft facility and choose the bank which is taking less interest rate on an overdraft facility. The one more advantage of an overdraft facility is that in case your balance becomes short and you require emergency funds for buying raw material, operating expenses, and other expenses, in such cases also you can use the overdraft facility of bank.
Comparison of Banks
Before choosing a business’s current bank account you should compare the different banks, don’t forget to compare the different banks. However, nowadays there are many online applications to compare different banks. Also, many other websites are there which makes this job easy for you. You can compare the different banks’ current accounts and the facilities given by them. Every information is available on those websites about different banks like overdraft facility, minimum balance requires, etc comparison.
There may be many banks around your business location. So how will you decide which bank suits you? For this location is very important, the branch of the bank should be nearer to your business premises so that it saves your time. Also keep in mind that the bank does not have too much crowd, because you have to go to the bank many times and if there is a crowd, it will waste your time. And choose the bank were all the facility are provided to you,
SME Branches (small and medium enterprise)
You should also check whether the bank is an SME branch or not. Because the government has introduced many facilities for SMEs like giving loans on the lower interest rates and many more. Also, many banks give some facilities on behalf of the bank, so you should ask the bank, are there any benefits for SME? This will help you to grow your business.
FAQ’S Regarding Tips to Choose Business Current Account
A single account with one bank. However, multiple accounts can be opened with different banks. But you need to declare another current account. Additionally, banks also insist on NOCs.
No, you can do it unlimited times.
Yes, it will help you to managing your fund better.
Yes, you can access your account via Net banking, Phone banking or visiting ATM.
You can use services such as Balance inquiry, Transaction history, Online shopping, View account statement, Transfer or receive payments through the third party, etc.
Editor’s Note | Tips to Choose Business Current Account
COVID – 19 has affected every sector in the word. So let’s talk about the effect of COVID – 19 on the banking sector in India specifically on factors to choose business current bank account. The government has decided to give a complete waiver on the minimum balance required, which means no charges will be taken from you even if your balance is zero. Additionally, you can take out money from any other bank ATM and no additional charges will be taken from you. But all these new rules were made for the limited period, which is from April 2020 till June 2020. As there is no extension announced by the government, so the old rules of ATM withdrawal and minimum balance account are taken into consideration.