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Distinguish Between Current Account and Fixed Deposit Account - Organisation of Commerce and Management

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Distinguish between Current Account and Fixed Deposit Account

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Solution

Basis of Difference

Current Account

Fixed Deposit Account

Meaning

It is that account which is maintained by businessman and others who have regular transaction.

It is that account where a fixed sum of money is deposited for a fixed period.

Withdrawals

Customers can withdraw money by cheques.

Customers cannot with draw during the fixed period. If withdrawn earlier, rate of interest will be less than applicable.

Facilities

The bank gives a passbook, cheque book, statement of account and pay-in-slip book to the customers.

The bank gives a fixed deposit receipt to the customers

Who takes it

It is suitable for traders, businessmen, firms or institutions.

It is suitable for any person with temporary idle cash.

Constraints on operation and withdrawals

There are no restrictions on the operation of a current account as long as there is balance in the account.

Payment is received only on expiry of the fixed period. If withdrawn earlier, rate of interest will be less than applicable

Rate of interest

Normally, interest is not given.

Interest rate is higher. Longer the period, higher will be the rate of interest.

Nature of Account

It is of continuous nature.

90% of the amount of fixed deposit can be given as loan.

Facilities

Temporary overdraft facility is given

It is for fixed period of time except when the fixed deposits receipt renewed.

Concept: Types of Business Services
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