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

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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. But what actually is the difference when it comes to a checking account vs. a savings account?

Checking Account Basics

Checking accounts are deposit accounts that let you write checks, pay bills or make other transactions online. Or, swipe your debit card as you buy everything from gas to your morning coffee, which means you don’t have to carry cash around everywhere to make purchases. Even if you don’t write checks, a checking account is the foundation of your personal banking.

Most employers will directly deposit your paycheck into your checking account, and you can set up automatic bill pay, with funds for your cellphone, credit card, utility bills and more coming straight from your account. With this convenient feature, you won’t forget to pay bills, helping you avoid late payment fees.

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Savings Account Basics

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.

Your paycheck can be directly deposited to a savings account, too, but since a savings account is designed to do just that — save your money — it isn’t your best option for frequent transactions. Many banks limit the number of free transactions savings account holders can make each month and charge a fee for exceeding that benchmark.

Many banks offer interest-bearing checking accounts, which makes it tempting to forgo 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 a large purchase. A savings account keeps your money out of sight while still giving you immediate access should you need it.

What Is Better: A Savings or Checking Account?

Checking and savings accounts are designed to meet different financial needs, so the “better” account is the one that best helps you achieve what you need to do with your money. Both carry FDIC insurance protection of up to $250,000, so a savings account isn’t any safer than a checking account — or the opposite.

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Many people have multiple savings accounts. One can be for quick emergency cash, while others can be for long-term savings or to put money away for a house, wedding, vacation, car or other big expenses. That money for long-term use often is stored in online accounts that offer higher interest rates than at your local brick-and-mortar bank. The online institution TAB Bank, for example, currently offers a rate of % APY with no minimum balance and no monthly fees.

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

Checking Savings
Features Typically includes a debit or ATM card May come with an 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

Is a Debit Card for Checking or Savings?

First, it’s important to know the difference between a debit card and an ATM card.

A debit card is issued by your financial institution when you open a bank account, and it has multiple functions. You’ll use your card to deposit or withdraw money at an ATM, or to get money back with a purchase at a retailer that offers the cash-back option.

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The card, if it has a Visa, Mastercard or Discover logo on it, can be used to pay for purchases at a retailer that accepts those cards. But you’re not buying anything on credit. Instead, the money to buy that pair of shoes will come straight from your bank account. You also can shop online with your debit card.

A debit card typically is issued to owners of checking accounts. Your financial institution could issue an ATM card with your savings account. The card you’ll receive with that account is a key difference between checking and savings account usage.

Compared to a debit card, an ATM card has limited functions. It is only used to get cash back, or at some banks and credit unions, make deposits at ATMs. You can’t complete a purchase online or in a store with just an ATM card. 

The Benefits of Linked Checking and Savings

It could be beneficial to have a savings account at the same financial institution as your checking account. By linking the two accounts, you can transfer money from your savings account to your checking account to cover a scheduled online bill to be paid or a check you must write if your checking account balance is falling short.

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Many financial institutions also allow you to cover a check with money in your savings account, if the check otherwise would bounce. While some banks might charge a service fee for that service, it will be lower than the fee — typically in the $35 range — that your bank will assess for a transaction returned for non-sufficient funds.

Chase, for one, doesn’t make clients pay if it has to dip into a savings account to cover a check through its overdraft protection program.

Minimum Balance Requirements

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.

How Much Money Should I Keep in a Checking or Savings Account?

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.

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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 are unsure where to start on your savings, one way is to build your emergency fund. If you keep your emergency fund in a savings account, financial experts recommend keeping enough money there to cover three to six months’ worth of expenses.

How To Choose a Checking or Savings Account

Picking 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:

Every consumer needs a reliable bank to handle daily financial needs. Your checking account is the starting point for paying bills and everyday expenses. A savings account can be a valuable complement.

Allison Hache contributed to the reporting for this article.

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