How to Tell the Difference Between A Current Account and Savings Account

Current accounts and savings accounts are the two most common types of checking accounts offered by banks - but what exactly is the difference between the two?

In Malaysia, there are many, and we mean many, types of deposit accounts offered by the banking sector. For example, Maybank has over 10 types of savings accounts to choose from, and that is only one bank, albeit the biggest bank in the country! So where do we start? Usually, a person would have a basic savings account or basic current account or both (some might refer to these as checking accounts). But before we settle the score between these two types of accounts, let us answer a commonly asked question regarding banks.

Is my money safe? 

You may not believe this, but many Malaysians are still averse to banks - specifically, trusting the banks to keep their money safe. If you are one of these people, who have been keeping their money under the mattress all these years, it might be time to rethink your current financial plan.

Here's the short of it - your money is safe and secured. Many local and foreign banks in Malaysia are protected by Perbadanan Insurans Deposit Malaysia ( PIDM) which insures up to RM250,000 of your savings. There are a few exceptions, such as high risk investments like unit trusts, share trading, and gold-related investments.

The similarities

Any one individual can open one basic savings and current account per bank, while Small and Medium Enterprises ( SME) are allowed to open only one current account per bank. Other than functioning as means to store your wealth, with these accounts, you will have the convenience of:

  1. Over-The-Counter transactions
  2. Automatic Teller Machines ( ATM) using your ATM/debit card
  3. Interbank-GIRO
  4. Internet Banking for bill payments

How do you keep these accounts safe? In other words, there are responsibilities that you must undertake as an account holder.

  1. Never give out your account numbers i.e. PIN number linked to ATM/Online Banking/Phone Banking.
  2. In extension to rule 1, beware of phishing websites that asks you for your account details.
  3. Inform your bank of any changes in your contact details, address, loss of cheque, or any discrepancies in your bank statement.

Current Account

What is it?

A current account is at it's most basic level, a deposit account that allows you to make payments in the form of cheques. For businesses, there needs to be someone authorised to sign these cheques -  if there are any changes in signatories, the bank has be notified right away. Any withdrawals from your account can be made either with an ATM card, debit card, and even the aforementioned cheque.

Many banks offer attractive interest rates for current accounts, but only with VERY high levels of deposits (can be RM1 million and above). Unless you need large sums of money readily available at any time, or want to save a large sum of money for less than 1 month, it might be a better idea not to apply for such an account simply for the high rate, as you may be able to get higher rates from Savings Accounts and FDs.

Current accounts are actually very similar to savings accounts with the exception of allowing you to write cheques.

How to apply

You will need to be at least 18 years old to apply. Remember to bring along your identification card (MyKad) and an initial deposit of at least RM500 before stepping into your favourite bank. There are two ways you can open an account:

  • Personal account, where you are the sole account holder or;
  • Joint account, where an account is shared by you and other parties

Savings Account

What is it ?

A savings account will enable you to receive interest gains on your deposits every month, with no maturity date such as a fixed deposit investment. Like a current account, you will be able to withdraw cash whenever you need it using your ATM, debit, or charge card, with the absence of a cheque book. To keep track of your account transactions and interest earnings, you can review them via your passbook or bank account statement.

If you are unsure how you earn your interest, here's an example:

Hakim opens a savings account that earns him 2.1% per year. His initial deposit is RM5,000. In one year, he would have earned RM105 on his initial deposit.

How to apply

The mechanics of applying for a savings account is not too different. As before, you will need your identification documents along with an initial deposit. One of the upsides when applying for a savings accounts is that an introducer normally isn't required, and the minimum deposit need not be in the RM100s, but usually only RM20, or even as low as RM1!


Fees and charges table

Fees     Maintenance     
   Account Closing        
   ATM withdrawal from other banks      
   ATM/Bankcard replacement            Cheque 
Current Account    
  up to RM10
N/A
  • RM1 within MEPS network
  • RM8 - RM12 if not within network
 up to RM12
   RM0.15* stamp duty
Savings Account 
N/A
N/A
  • RM1 within MEPS network
  • RM8 - RM12 if not within network
 up to RM12
   N/A

*Starting 1st January 2015, there will be an additional RM0.50 cheque processing fee (in addition to the RM0.15 stamp duty) as set out by Bank Negara Malaysia.

Which to get?

Both accounts have different uses, and are often times best used together. To sum it up, savings accounts will have accompanying ATM or Debit cards for easy access to cash for any withdrawals and easy bill payments. However, if you absolutely must use cheques, a current account will be the only option to provide you with such a service.

photos courtesy of freedigitalphotos.net

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