Types of Bank Accounts

Now that we know how banks earn money, let’s look at the main types of accounts people can open.

1. Savings Account – The Everyday Wallet

Riya, a college student, keeps her pocket money in a savings account. She can withdraw anytime, pay digitally, and the bank even gives her a small interest (of about 3-4% a year) just for keeping money there. Perfect for her day-to-day use, or any salaried people who want to save bit by bit.

2.  Current Account – The Business

Her dad runs a shop. He needs to send money to suppliers and receive payments from customers all the time. For him, a savings account would be too limiting. So he uses a current account which has no limits on transactions. However, current accounts give no interest. But for businesses, speed matters more than small earnings.

3.  Fixed Deposit (FD) – The Long-Term Locker

Meanwhile, Riya’s grandmother isn’t interested in quick spending. She wants her money to grow safely. She puts a lump sum (big amount of money all at once) in a Fixed Deposit, locking it away for a year. In return, the bank rewards her with a higher interest rate than a savings account. She can’t touch it until the year ends, but she gets guaranteed growth. If she withdraws the money early on, she may incur penalties. 

4. Recurring Deposit - The Piggy Bank

Riya’s younger brother had a different goal. He wanted to buy a bicycle but didn’t have enough money at once. So, he opened a Recurring Deposit (RD) account. Each month, Aarav put in a small fixed amount from his pocket money. The bank added interest on top, and by the end of the year, his savings had grown enough for him to buy the cycle for himself.