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Main Differences Between Checking and Savings Accounts

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Updated March 9, 2024

When shopping around for a new bank account, there are two general categories to choose from: checking and savings. Here’s a look at the key features of both, what to consider when shopping around, and how to find the right account for you.

Key differences between savings and checking accounts

Checking accounts are transactional bank accounts, meaning they are intended for everyday deposits and withdrawals. This is the account most people choose to spend from, and where they usually deposit their paycheck. Savings accounts, on the other hand, are depository accounts. This means they are intended for longer-term deposits and holding funds that aren’t going to be used right away.

Checking and savings accounts are typically available through the same financial institution, though some of their uses and characteristics differ. For example, your funds are the most accessible with a checking account, as deposits and withdrawals aren’t restricted as they may be with a savings account. With a savings account there may be deposit minimums, and not all of them come with check-writing privileges or debit cards, the way checking accounts do.

CheckingSavings
Goal
Everyday spending
Funds earmarked for the future
APY (national average as of Sept. 18, 2023)
0.07% if offered at all
0.45% APY
Fees
May range from $0 to $25 per month but can often be waived by meeting certain requirements
Typically fee free, though some accounts may have a monthly cost
Access to funds
Debit card, ATM, paper check, cash withdrawal, ACH transfer, wire transfer, money transfer app
ACH transfer, wire transfer, cash withdrawal (checks and debit cards are uncommon)
Minimum balance
Varies by account, can be as low as $0
Varies by account, can be as low as $0
FDIC insured
In most cases up to $250,000 per depositor, per account title, per financial institution
In most cases up to $250,000 per depositor, per account title, per financial institution

Checking vs. savings: Pros and cons

When it comes to comparing checking accounts with savings accounts, selecting a front-runner really comes down to your goals for the account. If you’re looking to maximize your interest earned, a high-yield savings account (HYSA) is what you need. If you’re looking to pay monthly bills, manage your spending, and enjoy free ATMs around the country, an everyday checking account would be your best bet.

Here are some of the pros and cons of checking and savings accounts.

CheckingSavings
APY
Typically very low, if interest is offered at all
Almost always offered; the best HYSAs and many online savings accounts may have rates notably higher than the national average
Fees
Common, but may be waived if you hold a minimum balance, receive direct deposits each month, maintain other accounts from the same financial institution, or use a connected debit card
Less common; may be waived by meeting certain requirements each month
Maximum transaction limit
No
Possible
Debit card and/or paper checks
Yes
Uncommon
Fee-free ATM network
Typical
Uncommon
Other possible features/benefits
Credit score trackers, free ATM network, fee reimbursement, budgeting tools, mobile app
Mobile app, credit score and budgeting tools

When to choose a checking account

The right bank account for you boils down to your personal needs and how you plan to use the account. Here are some situations in which you should choose a checking account over a savings account.

  • If you are looking for a catch-all account where you can deposit your earnings and make small daily purchases.
  • If you don’t want to be restricted by a possible monthly transaction limit.
  • When you want access to a debit card, paper checks, or both.
  • If you aren’t planning to keep a large amount of cash in the account.
  • When you don’t intend to let your money sit in the account for long and aren’t looking to maximize your interest earned.
  • If you want to potentially earn rewards or cash back on your daily purchases.

When to choose a savings account

There are plenty of situations when choosing a savings account makes more sense than a checking account. Some examples include:

  • If you are setting cash aside for a long-term goal or rainy day.
  • If you want to maximize the interest earned on your balance.
  • When you don’t plan to make many withdrawals or transfers from the account each statement cycle.
  • If you don’t need access to a debit card or paper checks on a regular basis.
  • If you aren’t planning to use the account for bills, daily purchases, or other regular transactions.

How to choose a checking account

Everyone will have their own personal requirements and goals; the best checking account for you isn’t necessarily the right one for your sibling, neighbor, or friend. Here are some questions you might ask yourself that can help you choose a checking account.

  • Do I want a local bank? Today, online banks are a very popular and feature-rich option, but you won’t have the ability to walk into a local branch if and when you need one. Local banks, on the other hand, have brick-and-mortar branches where you can cash a check, withdraw cash, take out a loan, and speak with a bank representative.
  • Can I avoid any applicable fees? There are many free checking accounts to choose from, but even some of the best banks charge monthly maintenance fees to checking account customers. For example, Chase checking accounts have a monthly service fee that reaches up to $25 per month. However, you can often avoid these fees by maintaining a minimum balance, making a minimum direct deposit amount each month, or holding other accounts at the same institution. Many online banks and fintechs, such as Quontic, offer accounts with no monthly fees, as well.
Simple and reliable APY
Quontic Bank

Quontic High Interest Checking

Simple and reliable APY

Quontic High Interest Checking

Best for
Simple and reliable APY
APY*
1.10%
Monthly fee
$0
Special offer
Free pay ring (otherwise $29) upon account opening
  • Do I need more than one type of account? Some customers want their checking and savings accounts at the same bank. Others want their savings to be “out of sight, out of mind.” Wherever you fall, deciding which products you need can help you pick the right account for you. For example, you may find that the best money market account (MMA) is offered by an online institution, while the perfect checking account comes from your local credit union.
  • How do I like to manage my account? An online bank probably isn’t right for someone who wants to deposit cash with a teller each week. A small, local credit union might not be the best pick if you prefer to deposit checks and make transfers from home and thus need a robust mobile app. And if you need access to fee-free ATMs, you may want to opt for an institution that offers a wide network. Pay attention to how you prefer to bank and find an account that offers those features.

How to choose a savings account

Many of the same questions apply when choosing a savings account. Here are some additional questions you may want to ask yourself.

  • How long will this money sit? If you’re saving for a goal in the near future, you’ll still want to earn as much interest on the balance as you can. If you’re saving for a long-term goal, maximizing those earnings can be very valuable. You may want to opt for a HYSA or a certificate of deposit (CD) to snag the best rates.
  • Do I need quick access to these funds? Even if your savings are earmarked for a specific goal, you may find yourself facing a financial emergency and needing to make a withdrawal quickly. If you don’t have other cash on hand, you may need a savings account that is connected to your checking account, gives you access to a local branch, or offers quick ACH transfers between institutions.
  • How will I deposit or withdraw funds? If you have checking and savings accounts at the same bank, you can usually transfer between them. If you opt for a savings account at another bank, you’ll need to make sure you can conveniently fund that account and withdraw money as needed.

Alternatives

Not sure if a standard checking or savings account is right for you and your financial goals? Here are some alternatives to also consider.

For savings

Instead of your typical savings account, you can potentially earn more interest by opting for another type of savings vehicle.

  • HYSAs offer higher-than-average interest rates and are most often available through online banking institutions.
  • MMAs are offered by banks and credit unions. An MMA behaves similarly to a typical savings account, but it may have different monthly withdrawal limits or added features, such as access to paper checks or a debit card.
  • CDs are long-term savings vehicles intended to lock away your savings for a defined period of time in exchange for a notably higher interest rate. (A six-month CD from CIT Bank is currently offering a 5.00% annual percentage yield (APY), for instance.) CDs are available for a few months or multiple years at a time and may be subject to penalties if you withdraw the money early.

For checking

If you’re looking for a daily transactional bank account, a standard checking account is usually the best option available. You may want to consider opening a high-yield checking account or rewards checking account if you’re looking to maximize interest on your daily balance or earn rewards for your everyday spending.

These accounts, offered by institutions such as Quontic and Axos, offer above-average interest rates on checking account balances. You may even earn rewards on your everyday spending and activity.

TIME Stamp: You really need both a savings and a checking account

Savings accounts and checking accounts serve two very different purposes and both are necessary for most financial strategies. Finding the right account for you depends on your goals, how you intend to use your money, and which features are the most important on a daily basis.

Frequently asked questions (FAQs)

How much money should you have in your checking account?

You should aim to hold enough money in your checking account to cover your monthly bills and expenses, including groceries, gas, and any other regular purchases. It’s wise to keep a little extra in the account as a buffer, in case you need quick access to emergency cash, want to make an unexpected purchase, or have an unplanned debit come out of the account.

What do you need to open a checking or savings account?

In order to open a checking or savings account, the financial institution will request your personal information, such as your name, address, date of birth, email address, and phone number. You may also need to provide your Social Security number and, depending on the financial institution, a credit check may be required. Once approved, you’ll need to fund the account by check, ACH transfer, wire transfer, or with cash at a local branch or retailer.

Which savings account earns you the most interest?

A high-yield savings account (HYSA) will typically earn you the highest interest rate available. These accounts, usually offered by online banks and financial institutions, have rates that are five to 10 times higher than the national average, and sometimes even more.

Are interest rates fixed on savings and checking accounts?

The interest rate on checking and savings accounts is generally fixed, though it is subject to change over time and with market rate adjustments. When rates change, customers typically receive a notification by email, snail mail, or as an alert through their bank’s online platform or mobile app.

Could I lose my money in a checking or savings account if the bank fails?

If your bank offers Federal Deposit Insurance Corporation (FDIC) or National Credit Union Administration (NCUA) insurance coverage, your deposits are protected if the bank fails. This deposit coverage is limited to $250,000 per depositor, per bank, per account title. It does not protect your deposits against fraudulent purchases, theft, or investment losses.

Should I have my checking and savings accounts at the same bank?

Holding a checking and savings account at the same bank can be beneficial if you need to transfer funds between accounts, want to see all of your balances in one place, or have an existing relationship with a financial institution. You may also qualify for reduced fees, higher interest rates, and more by holding multiple accounts with the same bank. On the other hand, keeping your accounts at separate banks can allow you to access higher interest rates and keep your money out of sight (so you don’t overspend).

How does Regulation D affect savings accounts?

Regulation D previously limited depository accounts, such as savings accounts, to no more than six withdrawals per statement cycle. If customers exceeded this limit, they risked their account being closed, converted to another product, or charged penalties. This limit did not apply to transactional products (such as checking accounts). However, Regulation D was amended in 2020 as a result of the COVID-19 pandemic, and banks are no longer required to adhere to the six-transaction rule.

Some banks do still impose this rule (or other withdrawal limits) on savings account and money market account products, but it is no longer a federal dictate.

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