Since we are covering the cash management subject, I figure it would
be good if I explain the difference
between savings account and current account.
You will be surprised that many people are not aware of the
difference and the fact that you can use cheque to make payment instead of
carrying a bagful of money around.
Note: In Malaysia
Savings Account is:
- A deposit
account held at a bank or other financial institution that provides principal
security and a modest interest rate.
- Savings
account funds are considered one of the most liquid investments outside of
the real hard cash.
- Money held
in a savings account can be withdrawn using automated teller machines
(ATM) and online banking system.
- No overdraft
facility.
- Need to
maintain minimum balance.
- Preferred by
individuals due to its
interest bearing condition.
Current Account is:
- A zero interest transactional account
held at a bank or other financial institution.
- Money held
in a current account can be withdrawn using cheque, automated teller machines (ATM) and online
banking system.
- Has *overdraft facility - you can
withdraw more than what you have in the account.
- No minimum
balance.
- Preferred by
the business due to its
overdraft facility.
- Also known as "checking" account.
*Not automatic. The bank has
the discretion to allow or disallow based on your financial track record.
The above are traditional definition. However in the world where
we can have hybrid cars, we can have hybrid accounts too! So now it is quite normal for a bank to offer interest bearing
current account provided you keep the balance above a certain threshold.
What I like most about current account is its checking facility.
Having the ability to issue cheque will eliminate the need to carry huge amount
of cash. You can never be too careful with your money. I'm sure you have
read news about people losing thousands of ringgit to snatch thieves or
mugging. Why put your life (and your money) at risk unnecessarily?
Thus I strongly recommend that you open a current account. With
online banking facility, it is actually quite simple for you to manage both
your savings and current account.
Keep all your cash in savings account and only transfer the
exact amount of cash to current account whenever a cheque is issued. This way
you can also monitor the status of your cheque, just in case it got lost in the
mail.
Besides current account, banks also have telegraphic transfer
(TT), interbank transfer (GIRO), standing instruction and many others that can
make your life easier. Spare some time to learn what it can do for you to
improve your life.
You must be wondering why I still use cheque instead of using
standing instruction or do interbank transfer when I need to make payment to
vendors.
The reason is simply to cut cost. Using cheque will
cost me $0.15 per transaction while using interbank transfer will cost $1 to $2
per transaction.
Recently I received a notice from our Central Bank. They are
revising the charges. In near future the transaction cost of using cheque will
be higher than interbank transfer. So I guess I will be using more interbank
transfer in the future!
“The greatest enemy of
knowledge is not ignorance. It is the illusion of knowledge.”
― Stephen Hawking
“I cannot teach anybody
anything. I can only make them think”
― Socrates