Savings Vs Checking Account

One of the most crucial tasks in a company is proper cash handling. It is one of the basic aspects that every business must take into consideration. Cash is one the most liquid asset owned and controlled by the company, for this reason, it is more susceptible to fraud and theft.

Keeping significant amount of cash in the office only puts it in a high risk, this is why company deposit their cash in banks. By this, the company impliedly transferred the risk to the bank for the possible loss of cash handling. Essentially, the company becomes the depositor and the bank becomes the depository bank.

In opening a bank account, several things should be taken into consideration, one of these is which bank account type should you use. In the Philippines, common type of bank accounts are Savings, Checking, Time Deposit, Foreign Currency, and Joint account. Most companies use Savings and Checking account.

A savings account is a type of interest-bearing bank account that facilitates money deposits; withdraw funds, and safe keep money with interest through time. This type of bank account cannot issue checks for payment. Some savings account requires a minimum maintaining balance, if the account balance falls below this, a bank fee will be charged against the account. In opening a savings account, you will be able to choose between ATM or passbook account.

With ATM account, you will be given an ATM or a debit card which you can use to withdraw funds, balance inquiry and other services provided by the bank. It is convenient if you have frequent transactions.

Passbook account is ideal for people or company who do not intend to use the money as often. Instead of a card, you will be provided by a passbook where all transactions are recorded, it acts the same way as bank statements. This needs to be updated frequently to reflect the latest bank transactions. For withdrawals, a withdrawal slip is usually being filled up to be presented to the bank with the depositor or authorized representative’s ID.

Although ATM account is more convenient, passbook account is safer as there is no risk of theft and ATM skimming.

A checking account, also known as current account, is a bank account type that allows you to issue checks for payments. This is suitable for account holders who manages significantly higher financial transactions. This type of bank account has higher minimum maintaining balance and pays low or no interest on deposit. Like savings account, checking account are also provided with a passbook or debit card.

In the Philippines, check payment is still the most common mode of payment for businesses. Some payments such as loans and lease payments even require the issuance of post-dated checks. Though online payments are now getting popular as banks nowadays offer online banking solutions which is more convenient to use.

While savings account is mainly used for savings, a checking account is used for spending. It allows numerous withdrawals through issuance of checks; this is sometimes limited in savings account.

The bank also offers the so-called automatic transfer account wherein the client depositor can simultaneously open both accounts. The purpose of the automatic transfer arrangement is to facilitate deposits on savings account and later transferring funds to the current account for check payments. Through this, the depositor earns interest on the amount deposit and transfer the amount to checking account only when needed. Balance on the checking account will always remain constant.

Whether having a savings or a checking account, the decision lies on where do you intend to use the money. Although a company may open both accounts, having a better understanding on these two accounts will help you appreciate their purpose.