What’s the Difference Between Checking vs. Savings Accounts?

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The main difference between a checking and savings account is that a checking account is used for daily transactions, while a savings account is designed to help you grow money over time. Most people find it beneficial to have both accounts at their disposal for various financial transactions. Each serves a unique purpose.

What Is a Checking Account?

Checking accounts are deposit accounts that let you write checks, use bank debit cards or check cards, and make online transactions, which means you don’t have to carry cash around everywhere to make purchases. This alone makes it worthwhile to have a checking account.

Other benefits of having a checking account include:

  • FDIC insurance protection of up to $250,000
  • Paychecks and other payments can be directly deposited into the account
  • Special relationship rates and other incentives that can help you grow your money

Your checking account might also let you use automatic debits to make recurring monthly bill payments. With this feature, you won’t forget to pay bills, helping you avoid late payment fees.

What Is a Savings Account?

A savings account is another type of deposit account that lets you earn interest on the money you keep at the bank. High-interest savings accounts and accounts with special promotions could net you even larger gains than you might get at your local bank.

A regular savings account has several perks — not the least of which is that many banks don’t charge fees to open or maintain one. In this respect, there’s no downside.

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Here are more benefits of having a savings account:

  • Quick transfers between checking and savings accounts at the same bank
  • Automated savings options with recurring deposits or transfers into the account
  • FDIC insurance protection of up to $250,000

Many banks offer interest-bearing checking accounts, which makes it tempting to forego a regular savings account. However, it’s still a good idea to keep a separate savings account to help you build an emergency fund or a fund for short-term goals such as a vacation or large purchase. A savings account keeps your money out of sight while still giving you immediate access should you need it.

Regulation D for Savings Accounts

Regulation D is a rule set by the Federal Reserve that details reserve requirements for banks and credit unions. One of these requirements is a restriction on the number of withdrawals or convenient transfers account holders can make from savings accounts.

You cannot make more than six withdrawals from a savings account per month without paying a fee. In some cases, the bank might even close the account if you consistently exceed the limit.

What Is the Difference Between a Checking and Savings Account?

Checking and savings accounts are both deposit accounts, but they are designed to meet different financial needs. Here’s an overview of the key differences.

Features

Checking and savings accounts can both receive direct deposits and give you access to online banking if the bank offers it. At many banks, you can transfer money between your checking and savings accounts.

Checking accounts typically come with a debit card or ATM card. Many savings accounts do as well, but not all.

Withdrawal Limits

As noted earlier, Regulation D limits the number of withdrawals or convenient transfers you can make out of a savings account. There is no such federal restriction on checking accounts, though some banks place a limit on the number of checks you can write during a given period.

Fees

Both types of accounts can incur fees, which are typically maintenance fees and charges for failing to meet balance requirements. Other common checking-account fees include charges for the following:

  • ATM use
  • Returned deposits
  • Stop payments
  • Check printing

Another thing to note is that you’re more likely to see overdraft fees on checking accounts because they see a greater number of withdrawals.

Interest Rates

All savings accounts earn interest, but you won’t find this feature on all checking accounts. Online banks typically offer higher interest rates than brick-and-mortar banks.

Bill Pay

In most cases, you cannot pay bills directly from your savings account. Remember that Regulation D restricts the number of withdrawals you can make.

The Ease of Online Banking

Most banks now offer bill pay as a feature for checking accounts. This lets you pay your bills directly from the bank’s website or mobile app and also eliminates the need for checks for many customers.

If need be, you can transfer money from your savings account to your checking account to pay a bill. Just be careful not to exceed the monthly limit.

Minimum Balance Requirement

Some banks have minimum balance requirements to avoid maintenance fees. This balance requirement can be as low as $5 or as high as $25 or more, depending on the financial institution.

Many banks waive these fees for customers who meet other requirements, such as making a specific number of direct deposits or linking accounts within the bank.

Here’s another look at key differences between checking accounts and savings accounts:

Checking Account vs. Savings Account
Checking Savings
Features Typically includes a debit or ATM card May come with a debit or ATM card
Limits No withdrawal limits Usually up to 6 withdrawals per month
Interest-bearing Available on some accounts Standard on all accounts; annual percentage yield varies by bank
Balance requirements Varies by bank Varies by bank

How Much Money Should I Keep in Savings vs. Checking?

Since checking and savings accounts earn little to no interest, it’s not always a wise decision to keep too much money in them. Any extra cash you have beyond an emergency fund is usually better used to pay down debt or invest in securities with a higher return.

Your checking account should have enough money to cover all your bills. In addition, you should have a buffer available to cover unexpected expenses or charges. The exact amount you need is a personal decision based on your own finances.

If you’re feeling behind on your savings goals, you aren’t the only one. A survey completed by GOBankingRates revealed that 50% of those who responded have saved less than $1, 000. Furthermore, a third of those between the ages of 25 and 64 had zero savings.

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If you are unsure where to start on your savings, one way is to build your emergency fund. The ideal amount of money to keep in your savings account depends on your financial goals. For example, if you keep your emergency fund in a savings account, there should be enough money there to cover three to six months’ worth of expenses.

How To Choose a Checking or Savings Account

Choosing a checking or savings account is a personal choice. What makes one account right for you might not work for others.

Think about your financial goals and spending habits before choosing an account. Next, check out these features for the accounts you’re considering:

Consider Before You Open an Account

  • Fees: Monthly and one-time fees can quickly add up. Try to find accounts that will let you minimize them or avoid paying them altogether.
  • Incentives: Some banks will pay you money just for opening an account. Others offer incentives such as promotional interest rates — even for checking accounts.
  • Convenience: If you prefer having a brick-and-mortar location nearby, make sure the bank you choose offers one.
  • ATM Network: Look for a bank that has fee-free ATMs near the places where you live and work.
  • Minimum Balance Requirements: There are plenty of free checking and savings accounts available. Choose one of these if you worry about keeping enough money in your account to avoid fees.

Do I Need Both a Checking and Savings Account?

Some kind of bank account is certainly desirable. A bank account makes it easier to manage your money and track your spending. Also, if you don’t have a bank account, you might need to pay high fees to cash paychecks and other payments at check-cashing stores.

If you have to choose between a checking account and a savings account, you might find a checking account more useful on a day-to-day basis.

However, since many banks and credit unions offer free checking and savings accounts, you might as well get one of each. As long as you can meet the minimum balance requirement — which in some cases is nothing — there’s no reason not to take advantage of what both types of accounts can offer.

This article has been updated with additional reporting since its original publication.

Our in-house research team and on-site financial experts work together to create content that’s accurate, impartial, and up to date. We fact-check every single statistic, quote and fact using trusted primary resources to make sure the information we provide is correct. You can learn more about GOBankingRates’ processes and standards in our editorial policy.

About the Author

With more than 20 years of experience as a freelance writer, Allison Hache knows a thing or two about creating quality content. She earned a bachelor’s degree from Florida Southern College and a master’s degree from the University of Florida. Her work has been featured on national and local websites.

What’s the Difference Between Checking vs. Savings Accounts?
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