For most Nigerians, the differences between the types of bank accounts don’t concern them, as long as they can use the basic feature of deposit and withdrawal. But not knowing the differences between these bank account services can mean you are leaving lots of money behind on the table, literally, not to talk of other advantages you probably haven’t yet thought of.
The most popular type of bank account in Nigeria is the savings account and for practical reasons. Its easy to open and requires less documentation compared to other types of bank accounts. But that is just about it with savings accounts, your specific lifestyle needs should dictate the type of account you operate.
Differences between savings and current accounts
The most erroneous assumption must people have about current accounts is that it is only meant for wealthy business people. In reality, the difference between savings and current accounts is just the documents required to open each type of bank account. Here are the major differences highlighted;
- Documentation: opening a current account in Nigeria requires you to have two other people with current accounts of their own that will serve as your references to the bank. Savings accounts on the other hand do not have this requirement that can be an encumbrance.
- Chequebooks: Not that it matters much anymore now that there are electronic fund transfers and other easier ways of making payments, but cheques used to be a popular method of making payments available only on current accounts. A cheque is a written order to a bank instructing them to make a payment to a third party from their bank accounts.
- Cheque lodgment: Cheques can only be paid directly into current accounts, this means that business owners who accept cheques should have a current account for easy lodgment of funds.
- Transaction limits: The limit on cash transactions, deposits and withdrawals are much lower for savings accounts compared to current accounts. Most banks don’t have transaction limits for current accounts.
- Opening balance: There is no opening balance for most savings accounts in Nigeria, you can open a functioning savings account without making any deposits. Current accounts on the other hand require a minimum deposit of N5,000 to open.
- Access to consumer credit facilities: most Current account holders have access to overdrafts and other loan facilities which is not readily available to savings account holders. Although some banks offer personal loans to select savings account holders on as needed bases.
- Interests: Savings account holders can get interests on their money based on how long the money lasts in their accounts, current account funds don’t usually accrue interests.
What is a Savings Account?
A savings account is a safe and reliable deposit account which bares interest and can easily be opened with any commercial bank of financial institution. It can be opened easily within minutes with minimal documentation requirements.
- Because savings accounts pay interest while keeping your funds easily accessible, they’re a good option for emergency or short-term cash.
- Easy to open with minimal documentation.
- Zero opening balance requirement
- can be opened online or through third parties without visiting the bank.
- Transaction limits most especially on withdrawals
- Its a good way to save money, but offers poor interest compared to other investment options.
What is a Current Account?
A current account is a cheque-in account that allows deposits and withdrawals without restriction. It also comes with a cheque book as well as different access to consumer credit facilities.
- Access to overdrafts and consumer credit facilities.
- Lodgment of cheques and dividend warrants.
- Cheque book enabled.
- No limits on deposits and withdrawals.
- Opening balance requirement of at least N5000 in most Nigerian banks.
- Two current account holders as references. This requirement is usually an encumbrance for most people.
- No interests on deposits.
- Can only be opened at a bank, cannot be opened online.
Can I have both savings and current accounts?
Yes, You can operate both savings and current account at the same bank so long as you meet the requirements for opening each type of bank account.
Can I change savings account to current account?
No, a savings account cannot be changed to current account, if you already have a savings account and wish to open a current account, you have to go to the bank and supply the requirements for opening a current account separately.
What are the 4 main types of bank accounts in Nigeria?
Savings account, Current account, Fixed deposit account and Domiciliary account.
What is the minimum balance for current account?
It depends on your bank, but the minimum opening balance for a current account is N5000. Some banks like UBA has zero minimum operating balance for a current account while others have betwee N1000 and N5000 as the minimum operating balance.
Can private individuals open a current account?
Yes of course, as long as you meet the requirements and a current account fits your personal lifestyle.
Is savings accounts safer than a current account?
they are both equally safe and funds in both savings and current accounts are insured by the Nigeria Deposit Insurance Corporation NDIC and regulated by the CBN.