If you go to a bank to open an account, you’ll likely see two main options: checking and savings accounts. Both will give you a place to store your money and keep it safe. Beyond that, they function quite differently. If you’re trying to decide between checking vs. savings accounts, we’ll break down what you need to know.

What is a Checking Account?

A checking account is a type of bank account designed to give people a place to keep their money safe while making it easy to use that money for day-to-day financial needs.

To that end, checking accounts typically allow unlimited deposits and withdrawals and offer tools to make it easy to access the money in the account.

👉 For example, checking accounts typically come with debit cards and checkbooks so you can spend money from the account, as well as bill payment tools to pay your bills.

What is a Savings Account?

A savings account is a bank account that keeps your money safe and helps it to grow over time.

Unlike checking accounts, savings accounts aren’t designed for easy access, so they won’t come with things like a debit card or checkbook. They also might limit the number of withdrawals you can make in a statement period.

To compensate for that, they usually pay interest on the balance you’ve deposited. The larger your balance and the higher the interest rate of the account, the more you’ll earn.

Checking vs. Savings Accounts: Similarities and Differences

Checking AccountsSavings Accounts
PurposeDay-to-day spendingSaving money for the medium-to-long-term
Activity LimitsNoneMay limit withdrawals in a statement period
InterestUncommon, typically low ratesYes, rates are usually higher at online banks
FeaturesCheckbook and debit card, Online bill payment, Mobile check deposit, Automatic paymentsInterest payments
FeesMonthly fees, Overdraft fees, ATM feesMonthly fee, Excess withdrawal fee
InsuranceUp to $250,000Up to $250,000

Checking accounts and savings accounts are designed for two different purposes, which means they function slightly differently.

Checking accounts are designed for daily use, which means they make it much easier to use your money. Checking accounts let you spend money by writing checks or using a debit card. They may offer online payments and automatic payments of regular bills.

Savings accounts don’t offer those tools. Instead, savings accounts make you transfer funds to a checking account before you use them because your savings account is intended for longer-term storage of your cash.

Savings accounts also discourage frequent use by limiting withdrawals in a single statement period.

Checking vs. Savings Fees

When it comes to fees, checking accounts usually involve paying more. Both savings and checking accounts may have monthly fees, but you can typically avoid them by maintaining a certain balance or meeting other requirements.

On top of monthly fees, checking accounts can charge fees when you use other banks’ ATMs or if you overdraft your account, meaning you spend more money than is in the account and send your balance into the negatives.

However, with proper use, you should be able to avoid fees on both types of accounts.

👉 One similarity between these accounts is their insurance. The Federal Deposit Insurance Corporation (FDIC) insures both types of accounts for up to $250,000.

Checking vs. Savings Accounts: Which Should You Choose?

Whether you should open a checking account or a savings account depends on your financial needs.

If you want a place to keep your money safe while also having the option to access it easily, a checking account is a clear choice. You can use the included debit card to buy things at stores or withdraw cash at ATMs. You can also use the account’s bill pay tools to pay things like rent or utility bills.

If you’re saving for a long-term goal and want a safe place to store your money while helping it grow, open a savings account. The account will add interest to your balance each month. Keeping your money slightly harder to access will also help you avoid spending it on impulse.

A savings account is also a good choice for holding your emergency fund. You want to keep this money apart from your day-to-day funds, but you also want to have quick access to it if you’re facing an emergency.

It is possible to have too much money in a savings account. If you’ve managed your money well and you’re accumulating more savings than you really need for emergency coverage and short-term goals, it may be time to consider opening an investment account.

Most People Should Use Both

The vast majority of people could benefit from having both a checking and a savings account and there’s little reason not to open one of each.

You can use your checking account for the cash you need on a daily basis and your savings account for extra funds that you won’t need to spend right away. Your savings account can hold an emergency fund or be used to save toward a goal.

💡 Tip: If you have multiple goals, you could even consider opening multiple savings accounts, each with a specific financial goal in mind.

The only thing to consider when opening both a checking and a savings account is the fees. Make sure you can maintain a sufficient balance in both accounts to avoid monthly fees before you open multiple bank accounts.

💡 Tip: If you’re considering how to choose a bank for your accounts or deliberating between a bank or a credit union, remember that you can choose more than one. One common strategy that people use is to have a checking account with a physical institution, like a local or national bank, and a savings account with an online bank.

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