Updated August 9, 2023

Checking vs Savings Account

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A checking account is for everyday use, while a savings account has less flexibility but higher interest. Get one or both, based on your needs.

Banks offer two basic deposit accounts: checking and savings.

Checking accounts are designed for everyday banking activities, such as making purchases and paying bills.

Savings accounts can grow your funds over time with the help of some interest.

Read on to learn more about these account types.

Checking vs. Savings Accounts

Here's a comparison of checking and savings accounts at a glance:

Checking AccountSavings Account
Use ForDaily expenses and transactionsSaving money for emergencies and goals
Monthly FeesVaries by bankVaries by bank
RestrictionsFree access anytimeLimited to 6 withdrawals per month
ATM AccessYesUsually no
InterestUsually none (negligible)Higher interest, but varies by bank
Bill payYesNo
FDIC-insuredYesYes

We'll dive deep into these differences later in this article.

Tip: Many banks offer bonuses for opening a new account. Check out a list of the best bank promotions that do NOT have a direct deposit requirement.

What is a Checking Account?

A checking account is a deposit account typically held at a financial institution, such as a bank or credit union. It is great for routine transactions, such as paying bills, receiving paychecks, or buying retail with a debit card.

Checking accounts may come with a monthly maintenance fee. Nonetheless, many banks can waive it provided you meet their monthly activity criteria.

Features of a Checking Account

  • Flexible money access. A checking account is designed to be your spending money account. You can freely use the money in it anytime with no limits.

  • Debit cards. You'll get a debit card, which allows you to make ATM withdrawals or purchase items directly using the funds in your checking account.

  • Checkwriting. Banks usually provide checks, sometimes for a small fee.

  • Online banking. It is common for checking accounts to come with online banking and mobile app services. This provides 24/7 access to your account.

  • Bill pay services. You can make single or automatically recurring payments on mortgages, credit card bills, utilities, student loans, etc.

  • No limits. Checking accounts generally have no monthly withdrawal or transfer limits.

Many checking accounts even feature "overdraft protection." It is a temporary line of credit that kicks in if you accidentally spend more money than you have available. Or if you have a linked savings account, your funds from savings can automatically be transferred to cover the overdraft amount.

Checking accounts, however, offer little or no interest. Usually, it's best to only keep enough money for your monthly expenses or what you intend to spend in the immediate future. If you have extra, it's best to save them in an interest-bearing savings account.

Benefits of a Checking Account

  • Easy and convenient access to funds
  • Pay bills quickly
  • Manage money better
  • Opportunity to establish a financial history

Related: Here is a list of the best free checking accounts without outrageous fees or high balance requirements.

What is a Savings Account?

A savings account is another type of bank account allowing you to save and earn interest on your money. It can be a good tool when you want to set aside funds for emergencies, future expenses, specific purposes, or long-term savings.

Usually, there is no monthly maintenance fee when you keep a savings account. This way, you can grow your money, especially with a high-yield savings account but without the extra cost.

Features of a Savings Account

  • Higher interest rates. Banks reward you for keeping your money right where it is rather than moving it around or spending it on bills or daily purchases.

  • No caps on deposits. You can add to your balance as much as you like. You can also check your monthly statement to see how much interest is accruing.

  • Limits on withdrawals and transfers. Regulation D limits the number of withdrawals and transfers on savings accounts to 6 per month. If you go over that amount, banks will usually charge varying (and sometimes steep) excess withdrawal fees.

    Regulation D refers to restrictions the Federal Reserve sets on certain transactions involving savings and money market accounts. It aims to control the amount of funds banks can lend out from these accounts, ensuring they remain accessible by the account holders whenever needed.

  • Limited access. You can't directly use the money in your savings. For example, your savings account will not allow you to pay bills directly from your account. For that, you'll need to transfer money into a checking account.

    Some banks may offer an ATM card to allow withdrawals from your savings. But unlike a debit card, these cannot be used to make purchases. Others require you to visit one of their branch locations to take out your money.

Benefits of a Savings Account

  • Protects your capital
  • Encourages financial discipline
  • Provides earning potential
  • Suitable for achieving short-term savings goals

Detailed Comparisons and Differences

Now let's break down the differences between checking and savings accounts.

Usage & restrictions
A checking account is supposed to be your spending money account. You can only use up to the funds in your account, or an overdraft will occur.

Note that banks usually have a maximum daily debit card purchase and ATM withdrawal limits.

Savings accounts are meant to be a safe place for your savings until you need to use them (like if you have an emergency or are ready to make a house down payment).

Interest rates
Although savings accounts will offer interest, the big national banks usually have very poor (practically negligible) interest rates. If you want a better return in your savings, look to high-yield online savings accounts.

Some online banks offer interest on checking balances as they have less overhead and often pass the costs onto customers.

Account fees
Most big national banks (such as Chase, Wells Fargo, Bank of America) charge monthly service fees on checking accounts.

Meanwhile, the biggest account fee to be aware of in savings accounts is the excess withdrawal fee.

Bill pay and checkwriting
Only checking accounts allow you to make payments out of them by paying a bill online or writing a check. Just about all banks will allow you to set up online bill payments for things like utilities, phone providers, mortgages, student loans, credit cards, etc.

There's a type of account called a money market account, a hybrid savings and checking account. You're still limited to 6 transactions/month, but some give you freer access to your money with checkwriting privileges.

Should You Have Both a Checking and Savings Account?

Having both a checking AND savings account is essential for your personal finance management.

  • You need a checking account for everyday purchases and bill payments.

  • You need a savings account for emergencies and your goals, whether that's a new car, your first home, or a vacation. A separate savings account will also help you track that money and make sure you don't accidentally spend it.

Many banks offer linked accounts. Some even waive their monthly fees as an incentive for opening both. You'll get a debit card that allows access to each account from affiliated ATMs, which makes withdrawals easier.

Keeping a linked checking and savings may also spur you on to better savings habits.

You can schedule automatic transfers from your checking account into savings. Or simply transfer funds when your checking account balance reaches a target level.

Leave enough money in your checking for outstanding bills and expenses! Also, make sure you understand the minimum balance requirements of both.

Should You Have Both in the Same Bank?

Having both your checking and savings in one bank can provide several advantages. It can make for quicker transfers, improved banking relationships, and easier record-keeping.

However, you may also find your account wishlists at different banks.

For example, you can get a checking account with a physical location while putting your savings in an online bank with a higher APY. Just ensure that you will be able to link these accounts for easy access.

How To Choose a Checking and Savings Account

When choosing a checking and savings account, it is always best to align it with your financial needs and goals to get the most out of each account.

Here are the top three things you may want to look for in a checking account.

  1. Fees
    Go for a checking account that has minimal, if not zero, monthly fees. Check other charges on transactions, ATM withdrawals, and overdrafts.

  2. Minimum balance
    Pick one that requires an amount you can manage. Since most banks will waive their monthly fees if you meet their minimum deposit, you can save on these charges.

  3. Accessibility
    If you prefer in-person transactions, choose a bank with a nearby branch. If you like writing checks, make sure your account has that feature.

On the other hand, here are the 3 most important factors in choosing a savings account.

  1. APY
    Although savings accounts provide low interest, even small differences in APY can impact your money's growth.

  2. Minimum balance
    Check if a smaller balance can go a long way by picking a savings account that will allow it to earn a decent rate.

  3. Linking ability
    While you ideally don't want to touch your savings, you still need to be assured that you can easily access your saved funds by linking them to your checking account.

Are checking and savings accounts safe?
Yes, checking and savings accounts are generally safe. Most financial institutions are insured by the FDIC or the NCUA. This means that if the bank were to go out of business, your deposits are protected up to $250,000 per person, per account ownership category, per bank.

How Much Should You Have In Your Bank Accounts

In general, for a checking account, we recommend that you only keep what is needed for 1 month's worth of expenses plus some cushion.

This means keeping what is needed for your rent/mortgage, utilities, other payments like car loans, everyday spending, and credit card payments. Add 25-50% more as a cushion to prevent overdrafts and any unusual larger purchases.

For example, if your monthly expenses add up to $4,000, you may want to keep an average of $5,000 - $6,000 in your checking account. Of course, as you pay bills and spend, your checking balance will go down, but it'll be replenished as you receive paychecks.

If you have additional cash, it should go into the savings account, where you can earn more interest.

We recommend having enough in your savings account to cover 3 - 6 months of expenses. This way, you'll be covered if the worst happens and you lose your job. You'll have enough to stay afloat for a while.

It's also important to have these savings for big emergencies, like if your roof collapses or your car breaks down.

If you have additional funds beyond 6 months' worth of expenses, it's best to invest them to earn more returns.

What Experts Say

CreditDonkey assembled a panel of industry experts to answer readers' most pressing questions.

Here's what they said:

Checking Accounts Promotions

Savings Accounts Promotions

Bottom Line

A checking account is necessary for everyday use of your money. A savings account is meant to be a place for saving money toward your goals. A good financial foundation includes having both types of accounts.

Note: Interest rates, fees, and minimum balances vary DRASTICALLY depending on the bank or credit union. Choosing where to save your money matters as much, if not more, than deciding the right kind of account for you.

Check out our top online checking accounts and online saving accounts.

Write to Kevin L at feedback@creditdonkey.com. Follow us on Twitter and Facebook for our latest posts.

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