There are three types of account which customers can open in a bank. These are current, deposit and savings accounts.
Current Account: Current account is the type of bank account usually operated by businessmen and organisations and is required if a customer wishes to make payments through cheques. In a current account, the customer is free to withdraw money on demand. The customer will be given a cheque book which he uses to withdraw money any time. Holders of current accounts are not entitled to interest but are charged commission by the bank. They can obtain loans and overdrafts from the bank. Simply put, current account is an account on which cheques are drawn.
Features of current account
- Money can be withdrawn frequently.
- Customers are entitled to the use of cheque book.
- Payment of commission is made by the customers to the bank.
- Holders of current account are not entitled to interest.
- Other people can withdraw money from the account on behalf of the customers.
Procedure for opening a current account
- The customer will collect and fill application form.
- He will submit a prescribed number of passport photographs.
- Two guarantors or referees must be provided to recommend the applicant.
- The customer will submit his complete particulars to the bank, showing personal details, especially when the account is an individual account but when it is a corporate account, other documents like certificate of incorporation, memorandum and articles of association, etc. must be added.
- The bank will issue him with a pay-in slip booklet.
- He will be issued an account number.
- He will pay in an initial deposit.
- A cheque book will be given to him.
Savings account: Savings account is the most common form of bank account. It encourages the low income earners to form or develop the habit of saving. This type of account is operated with the use of passbook. Owners or holders of savings account are paid interest for keeping their money in the bank and if withdrawals are more than twice in a month, it may not attract interest.
Features of savings accounts
- Money can only be withdrawn occasionally if interest is to be paid.
- It attracts a favourable rate of interest.
- Holders are issued with a passbook.
- Withdrawals cannot be made by another person on behalf of the customer.
Differences between savings account and current account
- Customers are issued with passbooks.
- It attracts interest.
- Only the holder can withdraw from the account.
- Withdrawal is occasional if interest is to be given.
- Customers are issued with cheque books.
- No interest is given to customers.
- Other people issued with a cheque can withdraw from the account.
- Withdrawal can be frequent.
Fixed deposit account: Fixed deposit account, also called time account deposit, is the type of account that is usually operated by individuals and organisations who have excess liquidity. They put part of the excess liquidity or money in the fixed or time account in order to earn interest. Holders are entitled to higher interest than savings account. Customers can withdraw subject to seven days of notice. People save money in deposit account for a specific purpose and it can be renewed on maturity. The customer will be issued with deposit account passbook. Fixed deposit is withdrawn at an agreed time.
Features of deposit account
- Money is deposited for a specific period of time.
- It attracts higher interest rate.
- Notice of seven days must be given before withdrawal.
ROLES OF COMMERCIAL BANKS IN INTERNATIONAL TRADE
- Provision of documentary credits: Commercial banks provide commercial credit facilities to exporters, which help them in payment for goods.
- Minimising of default in payment: Commercial banks guarantee payments for goods bought in order to ensure that default in payment is reduced. They help in confirming letters of credit.
- Discounting of documentary credit: Commercial banks can provide credit to facilitate foreign trade by discounting documentary credit. This will ensure that sellers are paid at once.
- Act as referees to customers: Commercial banks act as referees to exporters by providing information to foreign businessmen about their credit worthiness.
- Foreign exchange transaction: They help to arrange for the purchase and sales of foreign currencies, which are used to finance export and import trade.
- Issuance of travellers cheque: Commercial banks facilitate international trade by issuing travellers cheque to businessmen travelling abroad.