Different Types of Bank Accounts

Types of Bank Accounts

A bank account is a financial account maintained by a financial institution for a customer. A bank account can be a deposit account, a credit card account, or any other type of account offered by a financial institution, and represents the funds that a customer has entrusted to the financial institution and from which the customer can make withdrawals. Alternatively, accounts may be loan accounts in which case the customer owes money to the financial institution.

Keywords: Different Types of Bank Accounts, Types of Bank Account, Types of Accounts Offered by Banks

Broadly speaking, there are a few major types of accounts that individuals can maintain with banks:

Types Of Bank Accounts

  1. Savings Bank Account
  2. Current Deposit Account
  3. Fixed Deposit Account
  4. Recurring Deposit Account.
  5. No-Frill Account

What is a Saving Bank Account?

Savings Bank Account

A savings account is an interest-bearing deposit account held at a bank or another financial institution that provides a modest interest rate. There is no restriction on the number and amount of deposits. But banks or financial institutions may limit the number of withdrawals you can make from your savings account each month, and they may charge fees unless you maintain a certain average monthly balance in the account. Withdrawals can be made either by signing a withdrawal form or by issuing a cheque or by using ATM card.

What is a Current  Bank Account?

Current Deposit Account

"Current Deposit Account" is demand deposit and is meant for businessmen, firms, companies, corporations, trusts and individuals with no restriction on number of withdrawals. Cheque book facility is provided and the account holder can deposit all types of the cheques and drafts in their name or endorsed in their favour by third parties.  No interest is paid by banks  on these accounts.  On the other hand, banks charges certain  service charges, on such accounts. For the convenience of the account holders banks also allow withdrawal of amounts in excess of the balance of deposit. This facility is known as overdraft facility.

What is a Fixed Deposit Account?

Fixed Deposit Account

A fixed deposit (FD) is a financial instrument provided by banks which provides investors with a higher rate of interest than a regular savings account, until the given maturity date. It may or may not require the creation of a separate account
A fixed deposit account is an investment account and a type of savings account in which money is deposited for a stated period of time and a fixed interest rate is paid at the end of that period. It is a safer investment option when compared to other investment types such as shares or the money market.

What is a Recurring Deposit Account?

Recurring Deposit Account

Recurring Deposit is a special kind of Term Deposit offered by banks in India which help people with regular incomes to deposit a fixed amount every month into their Recurring Deposit account and earn interest at the rate applicable to Fixed Deposits.
The period of deposit is minimum six months and maximum ten years. The interest rates vary for different plans based on the amount one saves and the period of time and also on banks. No withdrawals are allowed from the RD account. However, the bank may allow to close the account before the maturity period.

What is NO-Frill Account?

No-Frill Account

No Frills Account, places emphasis on the smallest of deposits. No Frills Account is available to you without any minimum monthly average balance requirement. All the existing ‘No­-frills’ accounts opened by the banks are now converted into BSBDA in compliance with the guidelines issued on August 22, 2012 by the Reserve Bank of India (RBI). BSBDA guidelines are applicable to “all scheduled commercial banks in India, including foreign banks having branches in India”. No charge will be levied for non­operation/activation of in­operative ‘Basic Savings Bank Deposit Account’.

Frequently asked questions related to Bank Account

What is a current account in a bank?
A current account is a type of deposit account that caters to professionals and businessmen alike. Dealing largely with liquid deposits, this product allows for withdrawal of funds and checks being written against the balance and does not limit the number of transactions in a day.

What is the difference between RD and FD?
Fixed Deposit as the name indicates is fixed, in terms of principal amount, interest rate and maturity time. Recurring Deposit again is the same where you invest a fixed amount but repeat the process each month (in a recurring manner), over a time period selected by you, with a fixed interest rate.

How old do you have to be to open a savings account at a bank?
A savings /fixed / recurring bank deposit account can be opened by a minor of any age through his/her natural or legally appointed guardian.
Minors above the age of 10 years may be allowed to open and operate savings bank accounts independently, if they so desire. Banks may, however, keeping in view their risk management systems, fix limits in terms of age and amount up to which minors may be allowed to operate the deposit accounts independently. They can also decide, in their own discretion, as to what minimum documents are required for opening of accounts by minors.

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