Checking vs. savings accounts

By: Team Stash

Published: Jul 30, 2024

•  Updated: Sep 05, 2024

If you’re looking to open a bank account, you’ll be faced with a choice: checking vs. savings. But you don’t actually have to choose between them; it’s very common to have both. What’s important is understanding the differences between checking vs. savings accounts so you can use them to manage your money effectively.

Checking and savings accounts serve different purposes, and there can be advantages to having both types of account. When you need access to your money for everyday spending, your checking account makes it easy to make purchases or get cash at an ATM with your debit card. When you’re looking to put some money away for a rainy day, your savings account can keep it socked away so you don’t accidentally dip into it, and you could earn interest on it too.

What is a checking account?

A checking account is a type of bank account designed for everyday transactions. It’s the account you use to deposit your paycheck, pay bills, and make purchases using a debit card or checks. Think of it as the hub of your day-to-day financial activity, providing easy access to your money whenever you need it.

Features of checking accounts

Debit cards

When you use your debit card, it draws money electronically from your checking account. You can use your debit card to make purchases in stores or online.

Checks

Most banks offer the option of getting checks when you open a checking account, though you may have to pay a small fee for them.

Online and mobile banking

Most banks provide online banking services, allowing you to manage your account digitally. Some banks even have a dedicated app for accessing your checking account.

ATM access

Nearly all checking accounts allow you to withdraw cash from an ATM using your debit card and a PIN.

Common checking account fees

Even if your bank offers "free checking," you might encounter fees with your checking account. These can add up if you’re not careful, so it’s wise to be aware of all the fees you might encounter.

Maintenance fees

Some banks impose a monthly fee simply for maintaining an account.

Overdraft and NSF fees

If you inadvertently spend more money than you have available in your account, you may incur overdraft or insufficient funds (NSF) fees.

ATM fees

But if you use an ATM that is not part of your bank’s network, you may face additional charges.

Paper statement fees

Some banks charge a fee for providing paper statements.

What is a savings account?

A savings account is a deposit account at a bank designed to help you save money and earn interest over time. Unlike checking accounts, savings accounts are not intended for daily transactions.

Features of savings accounts

Interest

While some checking accounts pay interest, nearly all savings accounts do, and rates are typically higher for savings vs. checking accounts.

Withdrawal limits

Some savings accounts limit you to six withdrawals per month.

Online and mobile banking

If a bank provides online banking access or an app for checking accounts, it’s likely you can also access your savings account online too.

Common savings account fees

Fees for checking vs. savings accounts have some similarities, but there are also fees specific to savings accounts to be aware of.

Maintenance fees

Certain savings accounts may come with monthly maintenance fees.

Excessive withdrawal fees

If your savings account limits the number of withdrawals you can make each month, you may be charged for going over that.

Checking vs. savings accounts: key differences

The basic principles are the same for checking and savings accounts: you deposit your money at a bank and then withdraw it when you’re ready to spend.

Checking vs. savings: purpose

Checking accounts are intended for frequent spending. Savings accounts, on the other hand, are designed to help you grow your money over time.

Checking vs. savings: interest

One of the key benefits of savings accounts is that you earn interest on your money.

Checking vs. savings: access to funds

When it comes to accessing funds, checking accounts offer ease and immediacy.

Checking vs. savings: fees

While there are some fees common to both checking and savings accounts, there are other fees distinct to each.

Benefits of checking accounts

Convenience for daily transactions

Checking accounts make it easy to spend money, pay bills, and conduct your day-to-day financial life.

Accessibility of funds

You have lots of ways to quickly access your money with a checking account.

Ease of deposits

Getting money into your checking account is generally as easy as getting it out.

Debit card rewards

Lots of banks offer debit card rewards programs with their checking accounts.

Benefits of savings accounts

Earning interest

If you want to put your money to work for you, earning interest is one of the most effective ways to increase your wealth over time.

Financial discipline

The limitations on accessing your funds are actually a benefit of savings accounts.

Building an emergency fund

An emergency fund is a financial safety net for large unexpected expenses.

How to choose the right checking account

Fees and charges

Look for accounts that don’t charge monthly maintenance fees or require a minimum balance.

Access to ATM networks

Another important factor in choosing a checking account is your access to ATM networks.

Interest-bearing checking accounts

Most interest-bearing checking accounts require you to maintain a certain minimum balance.

Online banking and budgeting tools

Some banks offer digital and mobile banking as a prime feature.

How to choose the right savings account

Interest rates

Shop around for banks that offer the best rates.

Account fees

When comparing savings accounts, look at all the fees you might have to pay.

Minimum balance requirements

Make sure these requirements are manageable for your financial situation.

Alternatives to traditional savings accounts

High-yield savings accounts

High-yield savings accounts typically offer significantly higher interest rates compared to traditional savings accounts.

Money market accounts

Money market accounts offer the best of both checking vs. savings accounts.

Certificates of deposit (CDs)

Certificates of deposit (CDs) offer a higher, fixed interest rate over a predetermined term.

Security of checking and savings accounts

FDIC insurance

Both checking and savings accounts are protected by federal insurance through the FDIC.

Data security

Financial institutions take security seriously, and are subject to federal laws regarding privacy and protection of consumers’ financial information.

Checking vs. savings accounts: explore the benefits of both

When you’re looking into banking options, it’s not a question of choosing a checking vs. savings account. They each serve a different purpose, and having both can be an important way to manage your money and work toward your financial goals.

FAQs: Checking vs. savings accounts

What is the advantage of having a savings account?

A savings account allows you to earn interest on your deposits, helping you grow your money over time.

Is it worth putting money in savings?

Yes, putting money in savings can help you grow your wealth over time through interest and provide a financial cushion for emergencies.

Why would you put money into a savings account?

To earn interest, build an emergency fund, work toward financial goals, and develop good saving habits.