The most well-known activities of banks, in general, are banking intermediary operations, in which a bank allows public monies to be accessed through what is known as the activity of receiving bank deposits. let us talk about different types of bank deposits.

Various bank accounts have been created to satisfy the needs and aspirations of depositors, with current accounts, savings accounts, and deposit accounts being the most prominent divisions of accounts based on their contractual substance.

Below, we’ll discuss these accounts and explain their benefits, as well as highlight the most notable findings on these accounts from the perspective of the Islamic economy, as a model that offers a different perspective than the traditional economy.

Different Types of Bank Deposits?

Different Types of Bank Deposits?

What are the different types of Bank Deposits?

Bank deposits: current accounts

Bank deposits: current accounts

Bank deposits: current accounts

Introducing current accounts

Current accounts, also known as current bank deposits or demand deposits, are bank accounts in which the customer deposits monies with the bank with the understanding that the bank is bound to restore these funds to them without increase once they request them.

The current account pays no interest to the bank and allows the consumer to conduct a variety of financial transactions, including depositing and withdrawing monies from the bank or from ATMs using a debit card.

This card can also be used to pay the value of purchases at any time at stores and shopping places that accept debit cards, provided that the balance available in the account allows it, and it is possible to obtain a checkbook and pay by or collect it through current accounts, and service bills can be paid directly from the current account through the telephone banking service or the Internet, depending on the service.

Features provided by the current account

  1. Depositing and withdrawing funds available in your account if the account is active and there is a balance available.
  2. Obtain a checkbook if requested.
  3. The ability to obtain an ATM card if requested.
  4. The possibility of obtaining a periodic account statement.
  5. Transferring and receiving funds locally and internationally.
  6. Often, a minimum balance is required for the account to be opened.
  7. Account opening is free of charge.
  8. The bank does not offer any profits in Islamic banks, and it does not acquire any interest in traditional banks on the funds deposited in the current account.

Investing money in the current account

The current account is treated as a secured loan by the bank, which is required to return the funds to the account owner as soon as the account owner requests them, regardless of the bank’s profit or loss, and thus these accounts do not have any profitable returns, and of course, no usurious interest due to our agreement on the prohibition of bank interest in the Islamic Sharia.

But, as long as banks are committed to guaranteeing these monies and delivering them to their owners upon request, what profit do banks derive from these bank deposits or accounts? Simply put, current accounts are a valuable source of profit for banks because they are low-cost resources that the bank does not have to return any profit to their owners. Instead, the bank invests them in the form of loans, making profits and losses as needed. The more current accounts the bank can attract, the greater its investment opportunities.

Bank deposits: savings accounts

Introducing savings accounts

This account is known for its flexibility, as it allows customers to invest money while also having the opportunity to withdraw funds when needed since this bank account allows customers to withdraw and deposit funds without being bound by a time limit. It is also a secure way for the client to save money. The bulk of these accounts offers a profit margin based on the amount deposited. Other banks provide automatic exchange cards to their customers when they open a savings account; this is controlled by the bank’s laws, and some banks may not provide a checkbook for this sort of account.

Savings account benefits

  1. A savings account is the best sort of bank account to start, especially for people who want to open a bank account to save a small amount of money.
  2. The customer can withdraw and deposit money from their savings account at any time.
  3. Obtaining an ATM card is a possibility.
  4. Savings accounts offer a profit margin on the money deposited.
  5. The ability to use electronic financial services via the Internet, cell phone, and voicemail.
  6. Banks require a minimum amount of money to start a savings account; without it, the account cannot be opened.

Investing money in a savings account

What are the possibilities for using your savings account to invest money? As previously said, the savings account is versatile since it combines the benefits of both a current account and an investment bank account.

A savings account is treated in the bank as having two types of funds deposited in it, one of which is treated more like a current account that can be withdrawn at any time and does not enter into an investment because it is a bank-secured loan, and the customer does not receive any profit from this part. The remaining portion is treated as an investment deposit that is included in the investment but not guaranteed by the bank, and the customer is entitled to gains in exchange for this portion of the deposit if profits are obtained.

Savings accounts are treated as current accounts in traditional banks because they are a bank-guaranteed loan for the benefit of the customer, but they differ in terms of features because the savings account pays bank interest, whereas the current account does not pay interest very often, with an emphasis on the prohibition of bank interest and the prohibition of usury.

Bank deposits: investment accounts

Introducing investment accounts

It is deposited in the bank by its owners with the intention of receiving a return, and this account allows customers to deposit money in the bank with the intention of investing in exchange for a specified percentage of the profit, and the money must remain with the bank for a specified period, and it is forbidden to withdraw an amount before the end of this specified period, or the customer violates the agreement, and the desire to withdraw money subjects the customer to legal action.

Features of investment accounts

  1. The investment account has a minimum deposit requirement, which is considerable when compared to other accounts.
  2. The customer does not have the right to receive a checkbook with this account.
  3. The customer is unable to obtain an ATM card.
  4. When you remove your deposit before the deposit term ends, you may be charged a fee.
  5. In investment accounts, it is not possible to freely withdraw and deposit funds.
  6. The maturity of a deposit can be extended for an additional length of time.
  7. In most cases, the profit margin on a term deposit account is bigger than that on a savings account.
  8. This account is good for people who have a lot of money and don’t need it right away because the money is set aside for a particular period of time, usually a month to five years or more.
  9. It will be broken and interest will be lost totally in traditional banks if it is removed from the account before the stated date, and it will be regarded as a new deposit if a new amount is deposited.

Investing money in investment bank deposits

Investment bank deposits in conventional banks are identical to the rest of current and savings deposits, which are all usurious loans with a fixed return, where the bank is required to return the deposit amount in addition to the agreed return, and this increase is offset by the time period during which the deposit was held with the bank.

In Islamic banks, investment bank deposits are treated as a partnership in the capital, with the customer providing capital and the bank providing labor and work, and the profit is determined by agreement between them, with the customer losing money and the bank losing his effort and work, and this is provided that there is no negligence, misconduct, or violation of the agreed-upon conditions.

Islamic banks are similar to conventional banks in that they need a minimum deposit and a commitment to stay with the bank for a set amount of time.

Investment bank deposits are one of the most important sources of funds for both Islamic and conventional banks because they allow the bank to pay them to long-term investment fields, increasing the likelihood of a high return.

Now that you understand the variations between the various accounts, you can tell the difference between bank deposits and determine which investment accounts are best for investing your money and satisfying your needs.

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6 Differences that you Need to Know between Islamic Banks