Understanding Current Accounts and Differences with Other Types of Accounts

As interest rates rise, the topic of current account accounts becomes more topical. But transfers are often not possible here. What differences there are.

To open a current account, you need a checking account. It serves as a reference account and is necessary for transactions. Despite the similar functionality, there are clear differences:

• Direct transfers from the current account to a current account are not possible.
• Checking accounts carry less interest.
• A current account cannot be opened without a checking account, but vice versa.
• Direct debits cannot be debited from the current account.
• Both accounts have an IBAN, one card only has the checking account.
• Daily money accounts are purely credit accounts; negative balances are not possible.

Both types of account – daily money and fixed-term deposit accounts – are used to invest money. The daily money account is so flexible that you can access your money every day. A fixed-term deposit account, on the other hand, serves as a form of investment for funds that are invested for a specific period of time.

Disposals are not possible during this time, the interest rate is higher. As with a daily deposit account, you need a reference account for a fixed-term deposit account in order to carry out transactions. Direct transfers to payees, direct debits and payments are not possible.

The checking account is not suitable for saving as you hardly receive any interest. If there is enough money to pay fixed and everyday costs, no additional financial resources are needed in the account.

Avoid using overdrafts because banks charge high interest rates for them. If in doubt, plan a buffer for unplanned expenses; the rest goes into your current account.

Financial buffers of between two and three months’ salary are recommended. If the money stays in your checking account, you will lose interest. You earn interest on the current account, but you remain in control.

If you need the money you have saved, transfer it to the reference account and then withdraw it as usual with your bank card.

Fixed-term deposits earn a higher interest rate. Since you do not have access during the term, you only invest freely available and unneeded money.

The first two to three months’ salary belongs in the daily savings account as a savings buffer. Funds that are available beyond this yield more interest on the fixed-term deposit account.