Sep 22

What Is Meant By Current Account

What is a current account – What is current account – Current account definition

The bank is an ideal place to store your hard earned money. If you are to open an account in a bank, then there are two major types. One is the current account and the other is the capital account. The question is what is a current account ? Current account definition is very simple. It is nothing but the summing the balance of trade (difference between country’s exports and the country’s imports) and the factor income. A current account can increase the country’s net foreign income. This type of account is used by people who are getting for work first time and they need to deposit salary in it. Some banks allow only individuals aged 18 and above to have a current account.

what is a current account

Many people may doubt on what is current account and their benefits. It is a major measure for a country’s export trade. Here, private and government pays are encompassed in calculation. A country is deficit if it imports more goods or services than it actually exports. Current account surplus is a result of getting more income by exporting goods and current account deficit is the result of getting a loss in income as if goods are imported. The income account also known as net factor income is a sub-account of the current account, has outflows and inflows. Income refers to the profit gained by investing in abroad and also the amount sent by an employee, who is working in abroad to his family.

All constitute to the income account. This account must always be positive and in case if it is negative then you can be sure of one thing that your country is paying more than it gets. To do savings, your economy has to export more goods and services. The profit that is made out of it can be used to create foreign assets.There are different subcategories of income account which is linked to specific subcategories in capital account. Capital account is used to transfer any financial assets. From this, central banks can calculate the returns from foreign capital. There are lots of benefits on using current account; you can make transactions from one account to another very easily and quickly.

As internet is the biggest medium, you can make bank transactions online; if you are an employee, then your salary gets deposited to this type of account; you can pay bills online; you can issue cheques to anyone as if you have enough balance in your account; you can make use of the overdraft facility, which would help you to avoid cheques to get bounced. On having a current account, you will also be getting an interest paid to your account. Another big advantage of having a current account is that, you can avail loan so easily. This type of accounts are mainly given to business people as if they are stable in maintaining some big amount in their account and need to export their goods to foreign countries. So, to increase a country’s income, export rate must be higher than import rate.


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