SS2 Commerce Lesson Note on Types of Account

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TYPES OF ACCOUNTS OPERATED IN COMMERCIAL BANKS

There are three types of accounts which customers can open in a bank. These are; current deposit and savings account.

CURRENT ACCOUNT

A current account is an account opened by customers in a commercial bank with the aim of making deposit and withdrawal by means of cheque. It is suitable for business and often used by individual, companies and organizations. The customer will be given a cheque book which he uses to withdraw money anytime. Holders of current account are not entitled to interest but are charged commission by the bank. They can obtain overdraft. Current accounts are accounts on which cheques can be drawn.

FEATURES OF CURRENT ACCOUNTS

1. Money can be withdrawn frequently.
2. Customers are entitled to the use of cheque.
3. Commission is paid by the customer to the bank.
4. Holders of this account are not entitled to interest
5. Other people can withdraw money from the account on behalf of the customers.

PROCEDURE FOR OPENING A CURRENT ACCOUNT

1. The customer will collect and fill the application form
2. He will submit a prescribed number of passport photographs.
3. Two guarantors, who are account holders in a bank, must be provided to recommend the applicant.
4. The customer will submit his complete particulars to the bank, showing personal details.
5. The bank will issue the customer a pay in slip booklet.
6. An account number will be given to the customer
7. He will pay in an initial deposit with the pay in slip.
8. A cheque book will be given to the customer.

SAVINGS ACCOUNT

Savings Account is operated by low income earners who are small savers. Customers pay small amount and it accumulate over time. Holders of such account are entitled to interest but cannot withdraw frequently. The customer will be given passbook with which to make occasional withdrawal from the account.

FEATURES OF SAVINGS ACCOUNTS

1. Money can only be withdrawn occasionally.
2. It attracts a favourable rate of interest
3. Holders are issued passbook.
4. Withdrawal cannot be made by another person on behalf of the account holder.

DIFFERENCES BETWEEN CURRENT ACCOUNT AND SAVINGS ACCOUNT

SAVINGS ACCOUNT	CURRENT ACCOUNT
1. Customers are issues passbook	Customers are issued cheque book
2. It attracts interest	No interest is given
3. Only the holder can make withdrawal	Cheque can be issued to anyone.
4. Withdrawal is occasional	Withdrawal is frequent

DEPOSIT ACCOUNT

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