Claire Henry

Checking accounts and savings accounts are regarded as primary financial tools. However, most people are left wondering which one to opt for. There are various differences between these two accounts and depends on which one is right for you, based on your situation.

What’s the difference between checking and savings account

A checking account refers to a deposit account where you can open in a bank to facilitate your daily transactions, such as paying bills or purchases. One of the major benefits of checking accounts is its easy access to funds through ATMs, mobile banking, and online banking. 

» Related: How checking accounts work

A savings account refers to a bank deposit account where your money is held in the account at a higher interest rate than a checking account; however, you’ll more likely incur fees if you use your savings account to make purchases or pay bills.

» Related: How savings accounts work

Here are the 6 major differences between a checking account and a savings account. 

1. General use

Checking accounts are best for everyday spending and settling bills, such as one-time payments or recurring monthly bills whereas savings accounts are best for saving money for a particular period.

The money in savings accounts is left to accrue interest unless an emergency occurs or when you have achieved your goals. For instance, you can save for buying a car, house, or paying for college.

2. Deposits & withdrawals

Banks offer debit cards for checking accounts to enable account holders the ability to withdraw funds from their accounts to make payments at a store.

Savings account lack a debit card, so users must transfer funds from their savings account to their checking, or seek authorization from the bank.  Checking accounts do not have any limitations to the number of withdrawals.

On the other hand, savings account are sometimes limited on the number of withdrawals depending on the bank. For instance, some banks limit withdrawals between 3-6 withdrawals per month. Funds can be deposited in both accounts at any time without limitation on the number of deposits.

3. Interests

Checking accounts accrue little or no interest while savings accounts earn interest. The interest earned may vary based on the type of account, and the amount deposited and bank.

4. Common fees

Some banks require checking account holders to make several monthly transactions or maintain the minimum balance to avoid monthly fees. Although these charges vary, users incur relatively higher charges than savings account users. Savings accounts are usually free unless account holders exceed the withdrawal limit. Most banks do not charge a maintenance fee on these accounts.

5. Access

Checking account users can access their account and funds through online banking, mobile banking, ATMs, or make a personal visit to their banks at any time without seeking prior authorization. While savings account holders can access their accounts through the same methods, their access to funds is limited. 

6. Minimum balance

The minimum balance for both accounts varies and depends on the bank. However, the required average minimum account balance for checking accounts is higher compared to savings accounts (mainly to avoid fees).

Comparison chart

FeaturesChecking AccountSavings Account
General UseSpending moneySaving money
Deposits & WithdrawalsNo withdrawal limitsWithdrawals are limited
InterestsNo or low interestFunds accrue interest
Common FeesMaintenance, withdrawal, overdraftExcess transaction fees
Minimum BalanceRequiredDepends on bank

How to choose the best checking and savings account?

Before you choose your account, it is important to understand your financial goal. Some of the items to look out for when choosing a checking account include:

  • Availability of online services
  • Monthly maintenance fee
  • ATM charges

Similarly, you should also look out for the following items when choosing a savings account:

  • Benefits (if any) of opening a savings account with the same bank that handles your checking account
  • Annual Percentage Yield (APY)
  • Maintenance charges and how to avoid them
  • Availability of online services

Final thoughts

Checking accounts vary from savings accounts as they serve different purposes. You should view a checking account as a transaction platform for settling bills and purchasing items such as groceries. After all your monthly bills, you can look at building savings from your spare change in a savings account to accumulate interest and grow your money for a car, home and etc. 

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