Updated January 15, 2021

Checking vs Savings Account: What's the Difference?

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A checking account is for everyday use, while a savings account has less flexibility but higher interest rates. Read on to learn more.

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Difference Between Checking and Savings

Banks offer two basic types of deposit accounts for your money: checking and savings.

Checking accounts are designed for your everyday banking activities and transactions, such as making purchases, paying bills, etc. Therefore, you get free access to your funds whenever you need to use them.

Savings accounts are intended to let your funds grow over time. Often they offer higher interest rates to help your money grow. You're supposed to be saving money so you're limited to only a certain number of withdrawals each month.

Both checking and savings accounts are FDIC insured. This means that in the VERY unlikely event that your bank folds, the government will pay back what you had, up to a total of $250,000 per depositor, per bank.

If you have a checking and savings account under the same bank, you are insured up to $250,000 total for both accounts.

Here's a comparison chart to understand the main differences:

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

Let's start with a look at the different features of checking and savings accounts and then go on to explain in more detail.

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.

Features of a Checking Account

A checking account is designed to be your everyday spending account. Think of it as a digital wallet. Here's what you get.

  • Flexible money access. The money in your checking account is meant to be spent, not saved. You can freely use the money in your account at any time 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.

  • Check writing. Banks usually provide checks (sometimes for a small fee).

  • Online bill pay. Most banks also offer unlimited free online bill pay. You can pay mortgage, credit card bills, utilities, student loans, etc., using the money you keep in your checking. You can set up automatic recurring payments or make one-time payments.

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

Many checking accounts even feature "overdraft protection." This 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 overdrafted 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.

Read: Top Online Checking Accounts with High Interest and No Fees

Features of a Savings Account

Savings accounts are a place to save your money and have it grow over time. It's a great place to store an emergency fund and savings for your goals.

Here's what you can expect.

  • Higher interest rates. Savings accounts will typically offer higher interest rates than checking accounts. 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 statement every month and see how much interest is accruing.

  • Limits on withdrawals and transfers. The federal government 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.

  • 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.

Detailed Comparisons and Differences

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

Usage & Restrictions

Checking accounts are supposed to be for your daily spending and purchases. So you have free unlimited access for activities like:

  • Making transfers in and out of the account
  • Making purchases on your debit card
  • Withdrawing money at ATMs
  • Paying bills
  • Checkwriting

Of course you can only use up to the amount of money you have in your account, or else overdraft will occur.

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

Savings accounts are meant to be a safe place for your savings. So the intention is to keep your funds in the account until you need to use them (like if you have an emergency or you're ready to make a house down payment).

You're not supposed to be constantly withdrawing your funds, so the federal law limits you to just 6 withdrawals/transfers per month from a savings account.

Both checking and savings accounts have no limit to the number of deposits you can make.

Interest Rates

Checking accounts typically offer no interest, since funds are constantly moving in and out as you use them.

However, some online banks offer interest on checking balances as they have less overhead and often pass the costs onto customers. Check out these online checking accounts.

Most savings accounts will offer interest since the purpose is to grow your money. However, the big national banks usually have very poor (practically negligible) interest rates. If you want a better return on your savings, look to high-yield online savings accounts.

Account Fees

Account fees largely depends on the bank. Most big national banks (such as Chase, Wells Fargo, Bank of America) charge monthly service fees on checking accounts. You can waive these fees when you meet the required banking activity, such as a minimum amount of direct deposit per month or keeping a certain account balance. However, this essentially limits your use of funds if you need to maintain a balance.

Checking accounts also will have other account fees, such as overdraft fees, out-of-network ATM fees, wire transfer fees, stop payment fees, etc.

Online banks usually don't impose service charges on their checking accounts and have fewer account fees as well. Check out some of the best free online checking.

For savings accounts, many larger banks also impose a service charge unless you maintain a certain balance. Similarly, online banks usually will offer free savings accounts. The biggest account fee to be aware of on 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 provider, mortgage, student loans, credit cards, etc. You can set up auto-recurring payments or just a one-time payment.

Savings accounts generally don't allow you to bill pays and write checks, since you have limited transactions and the purpose is for saving money. If you really want to pay something from your savings, you'd have to first transfer the money out to a checking account.

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

Why You Should Have Both

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

  • You need a checking account for everyday transactions, like purchases and bill pay.

  • 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 keep track of 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.

But be sure to leave enough money in your checking for outstanding bills and expenses! Also make sure you understand the minimum balance requirements of both.

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

For example, if your total 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, they 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

HSBC
Member FDIC

HSBC Advance Checking - $200 Welcome Deposit

Expires 3/31/2021
  • Get a $200 Welcome Deposit for eligible new customers who open a new HSBC Advance checking account and complete the following qualifying activities.
  • Open your new HSBC Advance checking account online by March 31, 2021; and
  • Make recurring monthly Qualifying Direct Deposits totaling at least $500 from a third party to your HSBC Advance checking account(s) for 3 consecutive calendar months from the second full calendar month after account opening
  • You will automatically receive the $200 Welcome Deposit in your new HSBC Advance checking account approximately eight weeks after completing all qualifying activities. It's that simple.
  • Deposit products are offered in the U.S. by HSBC Bank USA, N.A. Member FDIC.
CIT Bank
Member FDIC

CIT Bank Savings Connect (Savings + Checking)

  • Earn a competitive high yield savings rate with access and convenience features of an eChecking account.
  • Earn up to 0.50% APY on Savings Connect and 0.25% APY on eChecking.
  • Savings Connect is a tiered interest rate account dependent on the account holder opening a linked qualifying eChecking concurrently and makes periodic qualifying deposits.
    • Base Tier: (0.40% APY, 0.399% Interest Rate) A minimum qualifying deposit of $200 is not deposited each month into the linked eChecking or the eChecking account is closed.
    • Upper Tier: (0.50% APY, 0.499% Interest Rate) A qualifying deposit of $200 or more is deposited into the linked eChecking account each month.
    • APY assumes a qualifying deposit of $200 or more is made to the linked eChecking account each month.
  • Minimum of $100 for both the Savings Connect and eChecking to open ($200 total).
Chase
Member FDIC

Chase Total Checking® - $200 Bonus

Expires 4/14/2021
  • Enjoy a $200 bonus when you open a new Chase Total Checking® account and set up direct deposit
  • Access to 16,000 Chase ATMs and more than 4,700 branches
  • Chase Mobile® app - Manage your accounts, deposit checks, transfer money and more -- all from your device.
  • Open your account online now
  • Available online nationwide except in Alaska, Hawaii and Puerto Rico. For branch locations, visit locator.chase.com.

Savings Accounts Promotions

CIT Bank
Member FDIC

CIT Savings Builder - Earn 0.40% APY

Earn up to 0.40% APY. Here's how it works: Maintain a minimum balance of $25k OR make at least a $100 minimum deposit every month. Member FDIC

Discover Bank
Member FDIC

Online Savings Account - Earn 0.40% APY

  • No fees
  • No minimum opening deposit
  • No minimum balance required
Axos Bank
Member FDIC

High Yield Savings - 0.61% APY

  • 0.61% APY on all balance tiers
  • No minimum balance requirements
  • No fees to open or maintain account
  • Free ATM card upon request
  • FDIC Insured

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. And remember that you can listen to CreditDonkey Radio any time.

Note: This website is made possible through financial relationships with some of the products and services mentioned on this site. We may receive compensation if you shop through links in our content. You do not have to use our links, but you help support CreditDonkey if you do.

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