Traditional vs zero balance current account for Start-ups

Starting a business is exciting, and requires careful planning, especially when it comes to managing finances. A key decision that new business owners need to make is choosing the right type of bank account for their company. 

Different banking accounts are available for businesses and individuals, including traditional accounts and zero balance current accounts. Let's find out the key differences between these two types of bank accounts.

Also read: What makes a new business financially sustainable?

What is a traditional current account?
 

A traditional current account is a standard bank account that requires a minimum balance (set by the bank) to be maintained at all times. The minimum balance is usually high, and if your funds fall below the required amount, the bank charges a penalty fee. Traditional current accounts are ideal for established businesses that have a steady flow of income and can maintain the minimum balance.

Other features of a traditional current account
 

• The overdraft facility can be helpful for businesses that require additional funds to manage their cash flow
• Internet banking provides a range of features, including balance enquiries, fund transfers, and bill payments. One can also keep track of all their bank accounts using a mobile banking app.

Benefits of a traditional current account
 

• Traditional accounts find wide acceptability among vendors and suppliers. It means businesses can make payments easily without a hassle
• Some current accounts offer merchant services, allowing you to accept debit and credit card payments from customers

What is a zero balance current account?

A zero balance account, as the term suggests, i s one that does not require a minimum balance to be maintained. This account is intended for new firms and small enterprises that might not have a consistent income stream and whose account balance could drop to nil at a given time.

Other features of a zero-balance current account
 

• Businesses do not need to provide extensive documentation to open this account
• Businesses, organisations, trusts, private and public enterprises, owners, and individuals may use this account's features
• Some banks offer an overdraft facility by providing short-term credit when needed

Benefits of a zero-balance current account
 

• This type of account works for Start-ups and small businesses that need a low-cost, easy-to-open-and-use account, allowing them to efficiently manage cash flow
• A zero balance current account is easy to set up and maintain

Difference between zero balance and traditional current account
 

Also read: Beyond funding: How can startups benefit from IDFC FIRST WINGS?

Conclusion

Both zero balance current accounts and traditional accounts have their benefits and limitations. If you are a Start-up owner, evaluating your financial needs and choosing an account that best meets your requirements is vital.

The FIRST WINGS program by IDFC FIRST Bank is one of the top banking solutions for Indian Start-ups. It provides more than just major banking solutions and expertise; it includes mentoring for founders and additional support beyond banking. Furthermore, the program features access to more than 100 offers and packages across various categories through 80+ Beyond Banking partners. Click here to know more.

Disclaimer

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