Write notes on each of the following: (a) Savings account (b) Current account (c) Fixed deposit account.

Answer Details

(a) Savings account. This is a deposit account operated mainly by small savers with a commercial bank or savings bank. It earns interest, encourages the saving habit, and usually requires the presentation of a passbook (or card) for withdrawals. Withdrawals may be limited in number or amount, and cheques are not normally issued on it. It is suited to people who wish to keep money safe while earning modest interest.

(b) Current account. This is a demand-deposit account used mainly by businesses and traders for frequent transactions. The customer is issued a cheque book and can withdraw or pay by cheque at any time. It earns little or no interest, and the bank usually charges commission on turnover (bank charges). It also allows overdraft facilities to approved customers, making it convenient for business payments.

(c) Fixed deposit account. This is an account in which a sum of money is deposited with the bank for a fixed period of time (for example three months, six months or a year) and cannot be withdrawn before the agreed date without notice or loss of interest. It earns a higher rate of interest than a savings account because the bank can lend the money over that period. It suits customers who have surplus funds they do not need immediately.