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What Are The Features & Benefits Of Having A Current Account?
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Disclaimer: This Article is for information purposes only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. The Bank makes no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Article. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from the Bank. The Bank, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein. Tax laws are subject to amendment from time to time. The above information is for general understanding and reference. This is not legal advice or tax advice, and users are advised to consult their tax advisors before making any decision or taking any action.
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20 JULY, 2023
At first glance, a Current Account may seem no different from regular bank accounts. However, it is an account specifically designed keeping in mind the banking needs of business owners. If you open a Current Account, you are giving your business the boost it needs by providing it with the following benefits:
1. Separates business and personal transactions
As a business owner, especially if you are running a start-up or a home-based business, it must seem natural to use your personal savings accounts for even your business transactions. While this may not cause any problems at the beginning, as your business grows, the lack of segregation between your business and personal transactions will make many things messy. This includes keeping track of your business’s cash inflows and outflows, seeming professional when dealing with clients and vendors, and maintaining financial accounts. To keep things organised, professional, and convenient from the very beginning, you should open a Current Account.
2. Provides an overdraft facility and other benefits
The benefits of a Current Account are specifically designed for businesses and a savings account does not have these features. One such helpful feature is the overdraft facility, which allows you to withdraw more funds than the balance in your account up to a certain limit. This can come in handy when you are short on working capital and need to meet certain expenses immediately. Other benefits of a Current Account include home banking or doorstep banking, free demand drafts and pay orders up to a certain limit, higher transaction limits per day, and more.
Additional Read - Understanding the overdraft facility in a current account
3. Offers the opportunity to earn attractive returns on idle funds
When you open a Current Account, it is important to know that unlike a savings bank account, your balance does not earn any interest. Even though there is a minimum Average Quarterly Balance (AQB) requirement, there is no interest paid on it. However, there is still a way for you to utilise your idle funds. Most Current Accounts come in with a sweep-in feature that converts your excess account balance into term deposits allowing you to earn attractive returns.
4. Allows you to establish creditworthiness
One of the major benefits of a Current Account is that it helps you establish your creditworthiness in several business deals and transactions. It is common for lenders and suppliers to want to check your creditworthiness before working together. In such cases, your bank could issue a credibility letter. This will be even more helpful if you transact with foreign parties. In addition, when your business grows and expands, you may need lending solutions, it will be easier to show the required documents as your business and personal transactions would have been separated right from the start. This would help financial institutions get a clear picture of the financials of your business.
In addition to all these basic benefits of a Current Account, you may be able to enjoy additional benefits depending on the type of Current Account you opt for and your relationship with the bank. The process of opening a Current Account online or offline is simple and quick so do not delay any further and open a Current Account today!
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