Current Account vs. Savings Account: Which is Better?

Current accounts are one of the most popular types of accounts offered by banks and building societies in the UK. This account allows you to deposit, withdraw and transfer through a variety of functions. On the other hand, savings accounts are the perfect vehicle for storing away money for a rainy day.

Which is the right account for you?  Consider these comparisons before you make your choice.

Savings Account

As the name suggests, this type of account is primarily used for saving cash. You may be putting the money away for a specific purpose, such as college or a holiday. Some savers are stockpiling a lump sum for emergencies, such as redundancy or a medical crisis.

The primary feature of savings accounts is that they earn interest on the balance in the account. The rate varies significantly, depending on the type of account and bank you choose. Some savings accounts allow you to access your money at any time without penalty. Others, known as “fixed notice” or “term” accounts, require you to leave the money in the account for a set period of time before it is withdrawn.

Current Accounts

Current accounts are primarily chosen for liquidity and convenience. Funds can be deposited or withdrawn from the account at any time without penalty. Withdrawals can be done by a variety of methods, including checks, cash machines and debit cards.

Current accounts usually offer additional features to add to their convenience, including overdraft facility, online banking and direct debits. Some current accounts pay interest on the balance, although the rate will probably be much less than you would earn on a savings account.

Shopping Around

Nearly every bank and building society and bank will offer their own versions of current accounts and savings programs. There are certain factors to consider when shopping around for either of these accounts. Variables include:

• Interest Rates – While not all current accounts offer them, interest rates are a standard feature for savings. No matter what type of account you are looking for, it is always a good idea to shop around for the best rate.

• Minimum Balance and Fees – Some banks require that you keep a minimum balance, particularly in savings accounts. There may also be fees assessed for various services. Make sure you know the cost of the account up front so you don’t get any surprises once the account is established.

• Location – If you plan to do all of your banking business online or over the phone, location might not be much of an issue. However, if the personal touch is important to you, find out if the bank or building society has a branch or post office location near to where you live.

To ensure you find the best account for your needs, identify those needs up front. Determine what the money in the account will used for and how much activity the account will see. Once you decide if a current or savings account will meet you need best, you can shop between banks and building society to find the best deal for your needs.