Choose from various types of Bank Accounts

Bank account

“Do not save what is left after spending; instead spend what is left after saving.”
Warren Buffett

If you have to maximize your returns from a bank, manage money and minimize fees then it is wise to put money into the best account and use the right tools for spending and savings. So, here’s a list of different types of bank accounts which will help you in choosing the best one that fits your needs and circumstances.

1. Savings Bank Account

A Savings Account is a deposit account facility provided by the bank wherein you can deposit your savings. Through banking, you can save money easily and offers facilities to make optimum use of cash. The interest rate provided by the savings bank account is anywhere between 3-4%. Read More: All about Saving’s Bank Account

Advantages:

  • Instead of keeping your money in the checking account, it is more beneficial if you keep your unnecessary funds in a savings account where your money can grow.
  • Liquidity of the savings account and one can withdraw cash during banking hours.
  • Easy and quick access to funds in case of an emergency.

Disadvantages:

  • When there is inflation the account earns no real returns.
  • Balance, including interests in an account above Rs 1 lakh is exposed to the risk of a bank folding up.
  • Also, it doesn’t have any tax advantages and is taxable under the head ‘Income from other sources.

Alternative
Mutual Funds can be the best option to save your income from inflation. Mutual Funds is an investment vehicle that pools money from several investors and invests that money to buy various securities in the market such as stocks, bonds, short-term debt etc. Mutual Funds provide returns between 9-15% or more, which is way more than Savings Bank Account and helps you to face inflation. Read More: Top Mutual Funds that have provide >15% returns.

2. Current Account

The firm, companies, and businessmen who generally have large and regular transactions use current accounts. The current account includes Deposits, Withdrawals, and Contra Transactions. The current account is also called a Demand Deposit Account.

Advantages:

  • A current account is meant for daily transactions. And can handle large volumes of Receipts/Payments.
  • Overdraw Facility – This facility is provided with a current account when an account holder draws more money than what the account holds.
  • A current account is a zero-account (you don’t have to maintain a minimum balance for it.) is generally associated with huge transactions on a regular basis.
  • Direct payment to creditors by issuing of Cheques, Pay- orders, or demand drafts.
    You can do unlimited transactions and withdrawals.

Disadvantages:

  • Minimum balance in maintaining a current account, which is Rs.25,000 is much higher as compared to a savings account.
  • Because of the fluidity that these accounts offer, they don’t earn any interest.
  • Limit on the amount of money that can be withdrawn in a day.

Alternative
Invest your money and do not earn returns? Then why choose Current Account when you can invest the same money Rs.25,000 and receive interest of 12-15% on your money.
You can invest as low as Rs. 500 a month and start a SIP(Systematic Investment Plan) with Mutual Funds. Explore: SIPs in Mutual Funds
On MyWay Wealth you can withdraw your Funds anytime. Hence it provides higher liquidity and you control on your money anytime.

3. Cash Credit Account

A borrower can withdraw money from a bank even if he doesn’t have a credit balance but the borrowing limit is fixed by commercial banks. This is an important source for business to raise its short-term finance.
As this facility is bound by a limit specified by bank i.e. the borrowing it is determined based on the drawing power of the borrower.

Advantages:

  • The flexibility of deposit and withdrawal
  • Cash credits are easily arranged at a short notice by bankers.
  • Interest tax is deductible hence reducing the overall tax burden.
  • Interest only on the amount utilized- as the lender charges interest on the amount withdrawn and not on the sanctioned amount.

Disadvantages:

  • Cash Credits cannot be used for long term purposes as it is given for a maximum period of 12 months and it has to be renewed when it gets expired.
  • More compliance and checks- As the borrower is under the obligation that he must
  • Present the quarterly/ semi-annually reports with the bank.

Alternative

  • MyWay Wealth provides Mutual Funds that are based on your financial goals, investment horizon, and risk appetite. So if your financial goals are for long term (>5 years) you can easily invest in Equity Mutual Funds.
  • To invest in Mutual Funds on MyWay Wealth all you need to do is complete the paperless KYC (Know Your Customer) process, which hardly takes 5 mins, and you are all set to start your investment journey.

So hope this article gave you a fair idea of all the traditional Bank Accounts and how Mutual Funds are a better option than them. And MyWay Wealth is India’s most trusted app for Direct Plan Mutual Funds. It gives you access to a wide range of tailor-made mutual funds that suit your financial position and all this for No Commission and No Fees.

Hurry, Start investing today on MyWay Wealth!

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