Current accounts and savings accounts have different uses and suit different purposes. If you want to understand the advantages of these two different kinds of accounts, then take a look at the guide we’ve created below for you. We will cover what they are both used for and why they can be useful for various reasons. Keep reading to find out more.
Uses Of Current Accounts
Current accounts can be used to make regular everyday payments and for salaries to be paid into from your employer. You can use your current account to set up your bills and to pay rent or mortgages from and make investments. Most banking apps will allow you to transfer money from your current account to your savings account and vice versa whenever you need to.
One of the benefits of a current account is that you can set up an overdraft should you wish to do so. Overdrafts are essentially a form of short-term loan that can be used to make payments if you overspend on the money in your account. Not everyone can qualify for them, and if you have a poor credit score, you may not be able to be granted one. Overdrafts shouldn’t be dipped into regularly but rather used as a safety net for unexpected payments and rainy days. If you do go into your overdraft, you should try and get out of it as soon as possible so that you don’t earn charges on the money you’re borrowing and end up having to pay a lot more back than you actually used. The charges for using your overdraft varies depending on the bank the current account exists with.
Direct Debits And Regular Payments
Direct debits and scheduled payments are not able to be taken out of a savings account. They can only be arranged to be taken out of current accounts. Therefore, if you wish to take out finance on something or set up installed payments, you will need to have a current account set up with enough money going into it to cover the payments when they are due.
Uses Of Savings Accounts
Savings accounts are, as the name suggests, a place for you to deposit money in order to set it aside and build savings. These types of accounts help you to avoid spending a certain amount of money as direct debits and finance payments, as well as other daily purchases which don’t come out from this account.
With both a savings account and a current account, there is the possibility for you to earn interest on your money. However, the interest rate will differ depending on the bank you set up your accounts with. So it’s worth researching interest rates across different options before you decide on the bank you want to use. The interest you personally earn is worked out as a percentage, so the more money you have in your account, the higher the interest you earn will be.