Checking vs Savings: Choose the Best Account Option (2024)

A checking account is where youkeep your money for day-to-day spending. You can use a checking account to pay bills or buy groceries.

Checking accounts can also be used to:

• Receive or send cash through apayment platform
• Deposit your paychecks
• Set up automatic payments for your bills
• To send checks

Usually, you will havea debit cardassociated with your checking account. So when you swipe your card to make a purchase or use an ATM, the funds come from your checking account.

Checking account pros

Checking accounts have lots of pros, like allowing you to make frequent deposits and withdrawals (money in a checking account isvery liquid). This also comes in handy when paying regular bills.

In summary, the pros are:

• No withdrawal limits
• Easy to use for everyday spending
• Ideal for paying monthly bills

Checking account cons

Unlike a savings account, many checking accounts don’t pay interest. For this reason, a checking account may not be the best place to store your long-term savings if you want to maximize the amount you can earn. While there are some checking accounts that do pay interest, theAPY(annual percentage yield) tends to be small. As of April 2023, FICO reports the current national average as 0.06%.¹

Using a checking account to store your long-term savings can also make it hard to distinguish between what money you want to save and what money you’re okay spending.

In summary, the cons are:

• Typically lower interest rates than savings accounts
• Not ideal for long-term savings

A savings account is where you keep money for future goals.Your savings are less liquid, and it’s where you keep money for more extended periods of time.You may even use your savings account as a rainy day or emergency fund.

There are different types of savings accounts,including traditional savings and high-yield savings accounts (HYSA). An HYSA is like a traditional account but offers a higher interest rate which can help you to grow your savings faster.

Savings account pros

Savings accounts with FDIC insurance provide a safe place to save your money. They also help you stay accountable by keeping money separate that you’re not willing to spend. This is useful when saving up for a big purchase like a car, home, or vacation.

Plus, you canearn some interest with savings accounts(more than you would in an interest-earning checking account).

In summary, the pros are:

• Typically has a higher interest rate than a checking account
• Allows you tobuild long-term savings
• May come with extra benefits likeautomatic savings
• Keeps money separate that you’re not willing to spend

Savings account cons

While many checking accounts offer unlimited transactions, savings accounts often have limits. However, the FDIC announced in April 2020 that it would no longer require financial institutions to enforce the limit of six monthly withdrawals.²

You also typically won’t earn as much in interest as you would using other investment or savings tools, such as a 401(k), IRA,certificate of deposit(CD), or money market account. According to the FDIC, the average interest rate for savings accounts currently stands at 0.39% APY as of April 2023.¹However, other savings tools may come with penalties.

In summary, the cons are:

• Monthly withdrawal limits often apply
• Investment accounts, money market accounts, and CDs usually offer higher interest rates
• Not ideal for everyday spending

Now that you know the basic pros and cons of checking and savings accounts, let’s compare them at a glance. Here’s a look at the main differences between checking and savings accounts:

When determining the best accounts for you, two main things to consider are bank fees and convenience. This helps ensure you’re keeping as much of your hard-earned money as possible while having access to your funds without extra hassle.

1. Bank fees

Banks and other financial companiesmake their moneyin a number of ways. One of these ways is by charging fees.

Common fees for checking accounts include:

• ATM fees:Charges that occur when using an ATM.
• Overdraft fees:Charges that happen when you spend more than what’s available in your account.
• Monthly fees:Charges for not maintaining a minimum balance, etc.
• Foreign transaction fees:Charges when you use your debit card outside of your country.
• Card replacement fees:Charge for asking for a replacement debit card.

Common fees for savings accounts include:

• Monthly maintenance fees:Charges to maintain your account each month.
• Overdraft fees:Charges if you withdraw more money than what’s in your savings.
• Minimum balance fees:Charges for not maintaining a minimum balance requirement.

Depending on your account, there may be ways to avoid these fees. However, it’s best to understand all the possible fees to prevent extra strain on your budget. You can explore options for spending and savings accounts without these types of fees.

2. Convenience

The next factor to consider when choosing spending and savings accounts is convenience.

ATM access:For starters, check the bank’s network of ATMs and see where you can withdraw money from afee-free ATM.

Customer service:Also, do some poking around to see how their customer service fares. Is it easy to get a hold of someone? Are they helpful once you get someone on the line or via chat?

Features:Automatic savings features, a greatmobile banking app, and the ability to send money to family and friends — these are all great features you should benefit from! Make sure you’re not missing out.

Whetheropening an accountonline or at a brick-and-mortar location, you must supply personal information such as your name, address, and date of birth. You’ll may also need to provide an ID number, like your Social Security Number.

Depending on your bank, you might need to fund your account before it is activated. Some accounts allow you to fund your account after it is open. You can fund your account in several ways, includingdepositing cash, using a pre-paid card, or sending an e-transfer from another account.

There are significant differences between checking and savings accounts. A checking account is designed for everyday transactions. You might use it to buy groceries, pay bills, and withdraw money from the ATM. A savings account offers a place to stash money to save up for future goals.

If you are considering opening a checking or savings account through an online-only option, check out thepros and cons of online banking.