Why are micro business owners encouraged to open and maintain a Current Account?
Maintaining a Current Account with commercial banks or co-operative banks is popular with businesses and enterprises that have a higher number of transactions with the bank regularly. Banks allow the current account holders to carry out any number of banking transactions with it namely deposits and payments, withdrawals and contra-transactions without there being any limit on the number of transactions made. This is a zero-balance account that has been popular with businessmen, traders, firms, etc., who have to deal with multiple transactions at regular intervals.
A Current account can be opened in most of the commercial banks. A current account being a zero-account, is generally associated with huge transactions regularly. Because of the fluidity that these accounts offer, they don’t earn any interest. These also usually do not carry a limit on the number of transactions that can be made.
Here’s a look into a list of advantages that are attached having a Current Account
Businesses usually have high volumes of deposits and withdrawals with the bank. One of the biggest advantages of maintaining a current account is that it allows customers to carry out any number of transactions. Secondly, it is also suitable to make payments to the creditors by using a cheque. The advantages are many and explain why small businesses have to have a current account running in their banks-
-Overdraft facility for current account holders- users can withdraw more money than what is there in their current account through the overdraft or OD facility. This ensures that businessmen can meet their expenses even if their payment from others are pending or delayed for some reason.
-Ease of carrying out business transactions-There are no restrictions on the deposits made into the current account opened with the home branch as much as there are no restrictions on the deposits made at other branches. However, this may attract minimal fees
-Improves creditworthiness of you and your business- if your current account shows a healthy flow of money as well as have a healthy relationship with the banks, it can add on to your creditworthiness as and when you require
-A host of other benefits-Since Current accounts are zero-balance account, there are certain privileges attached to your account. Free Demand Draft, pay orders, NEFT/RTGS transactions included.
On the flip side,
What stands out here is that there is an opportunity lost by way of losing on the interest rates on the money that you deposit in the current account. Secondly, although there is no limit on the number of deposits daily, there exists some limit on the withdrawals. Corporate business transactions involve high fees, which have to be understood at the time of opening an account. Since there is a lot of preconditions and paperwork involved, the chances of missing out on the specifics are equally high.
Current bank accounts are very popular among companies, firms, public enterprises, businessmen who generally have a higher number of regular transactions with the bank. This is a zero-balance account that can be used by entities to deposit, withdraw, and carry out other transactions.
Despite there being certain drawbacks, Current Account continues to be a popular transaction account for business entities, especially the ones who have to deal with high volumes of transactions regularly. Ease of operations and book-keeping make up for better organization of income, expenditure and accounts-all these reasons that explain why Current Accounts are a popular option to date.