Checking vs savings accounts
This table compares the main differences between checking and savings accounts.
| Feature |
Checking Account |
Savings Account |
| Purpose |
Short-term money storage with the ability to make frequent deposits and withdrawals |
Long-term, lower-access interest-bearing account that helps you save and grow your money
|
| Pays interest? |
Sometimes |
Yes |
| Average interest rate |
0.70% |
0.45% |
| ATM access? |
Almost always |
Sometimes, but limits and fees are likely |
| Withdrawal limit |
None |
Typically six per month, exclusive of in-person and ATM withdrawals |
The average interest rates are supplied by the FDIC..
What is a checking account?
Checking accounts are intended for everyday use.
The idea is to give people a safe place to stow their money, with account holders able to deposit and withdraw funds as often as they want.
Checking accounts come with a number of features to facilitate ready access. You’ll likely get a debit card that can be used in stores, online or at an ATM. Most banks now also have a mobile app through which you can make digital money transfers, pay bills, check up on ACH transfers and direct deposits and even scan and deposit checks.
There are also premium checking accounts that offer a range of perks to users able to maintain higher balances and willing pay higher monthly maintenance fees. Premium accounts often carry benefits such as low or no ATM fees, free checks, better interest rates, discounted lending rates and rewards based on loyalty and other account-related factors.
What is a savings account?
Savings accounts focus on longer-term money storage, typically exchanging the freedom of frequent withdrawals in favor of a higher annual percentage yield (APY).
You can use your savings account to put money aside for a rainy day or to save for a specific purpose such as a down payment on a new house, a vacation or retirement. Use a savings calculator to set a budget.
Because the funds in a savings account aren’t intended for everyday use, there are usually limits on how often you can access your money. During the COVID-19 pandemic, the U.S. Federal Reserve changed recommendations for saving account withdrawals, suggesting financial institutions upgrade from the previously permitted six transactions per month to allow unlimited withdrawals. Banks and credit unions are not required to follow the suggestion, however.
Traditional savings accounts
Traditional savings accounts are the most common type of savings account. They have a lower APY or low-yield interest rates. They’re usually free, especially if you also get a checking account with the same bank.
Here are the best banks offering traditional savings accounts:
High-yield savings accounts
High-yield savings accounts offer a much higher interest rate than traditional savings accounts. Sometimes they require a minimum initial deposit and balance in order to be eligible for high APY. It’s often a good idea to go for this type oif account if you already have some savings aside, at least $5,000 or more to get started. This means you’re able to meet the minimum deposit balance at all times. Keep in mind that some banks also have restrictions in withdrawing money and may have a fixed term.
Best high-yield savings accounts:
How are checking and savings accounts similar?
People often focus on the differences between these two types of accounts, but there are also many similarities.
Here are few things they have in common:
- Both are typically covered by the Federal Deposit Insurance Corporation (FDIC) or National Credit Union Administration (NCUA). NCUA and FDIC-insured accounts are protected for up to $250,000 per person, per financial institution.
- Both often offer access to cash and key information using an ATM card and the bank or credit union’s branded mobile app.
- Both types of accounts may charge fees for certain transactions, like cross-account transfers or monthly maintenance, but you can also find fee-free deposit accounts fairly easily.
- Both checking and savings accounts may have minimum balance requirements if you want to avoid fees and obtain the best APY, though many accounts of each type do not have this requirement.
- Both are available through online-only banks that may offer superior interest rates and lower fees compared to brick-and-mortar locations.
What’s the difference between checking and savings accounts?
Checking accounts are considered transactional accounts that are more likely to:
- Offer check-writing capabilities to the account holder.
- Have zero withdrawal limits, so you can access your money anytime you want.
- Come with a debit card that can be used for point-of-sale purchases and at ATMs.
- Have lower balance requirements, though lower balances can sometimes incur higher monthly maintenance fees.
- Have overdraft protection to prevent the account holder from incurring fees and penalties if withdrawals exceed the current account balance.
- Have a lower APY (if they offer interest at all).
Savings accounts are interest-bearing accounts that are more likely to:
- Earn higher interest rates, especially if you opt for a high-yield or money market account.
- Have set withdrawal limits, with fees assessed any time you go over that limit.
- Be used for a specific purpose, like saving for a child’s college tuition or a home remodel.
- Serve as overdraft backup, with a linked checking account automatically drawing from savings to prevent outgoing transactions from bouncing.
- Limit transactions to in-person visits to a “real world” location or digitally, using a website or app.
What do I need to open a checking or savings account?
It’s relatively easy to open a savings account or checking as long as you can gather some basic paperwork and have enough cash on hand (or in another account) to meet the minimum deposit requirement.
Are interest rates fixed on savings and checking accounts?
The APY on interest-bearing accounts is almost always variable, meaning it can change at any time.
The Federal Reserve sets benchmark rates that act as industry standards. The Fed may adjust its rates multiple times each year – rates jumped seven times in 2022 and on three occasions between January and June 2023. As industry standards change, banks and credit unions tend to follow suit, so the rate you had when you opened your account may change sooner than you think.
Financial institutions can also change a variable APY at their own discretion. For example, an online bank that’s focused on attracting new customers (or one that simply needs more depositors) may hike interest rates on savings accounts to generate more leads.
There are some types of saving accounts that offer fixed rates, too, such as traditional savings accounts (as opposed to high-yield options), money market accounts (MMAs) or certificates of deposit (CDs).
Could I lose my money in a checking or savings account?
If you’re worried about money in your checking or savings account being “lost” due to a market collapse or your bank going out of business, don’t panic.
Both types of accounts are safe. As long as your account is FDIC insured, you will be protected on up to $250,000 per person, per bank.
Otherwise, you can only lose money if your fees outweigh your deposits. Imagine you open a checking account with $200. Things are going well until you incur an unexpected expense and $205 worth of bills go through all at once. Your bank offers overdraft protection, but that comes with a fee of $25. Now your balance has dropped from $200 to -$30. This mistake is easy to avoid as long as you keep an eye on what you’re putting in your account and what’s scheduled to come out. Setting up your savings account as your overdraft safeguard can also help, and many institutions facilitate this setup for free.
Checking vs. savings account: Which is right for you?
Choose a checking account if you need easy access to your money and the ability to manage daily expenses.
Because access is arguably the biggest difference between checking and savings, opting for a transaction-based account ensures you can withdraw money and cover expenses without worrying about hitting transaction limits and racking up fees.
Choose a savings account if you’re more interested in making your money work for you – even if that means accessing funds less frequently. Many people have both types of accounts, using one for daily needs and the other for long-term savings goals.
How to find the best checking account
To find the best checking account, look for these features:
- Account types that match your goals (children’s account, college account, interest-earning checking, etc.)
- If you run a business, consider a business checking account such as the Bluevine Business Checking.
- FDIC protection
- Low or no-fee accounts
- Reasonable minimum balance requirements.
- A debit card and mobile app to increase access.
- An expansive ATM network, or at least one that covers your primary living and travel areas.
- For in-person banking, choose a bank with convenient locations.
How to find the best savings account
To find the best savings account, look for these features:
- Account types that match your goals (retirement, college, general savings, etc.)
- FDIC protection
- Low- or no-fee accounts
- Higher-than-average APY
- Rewards program to help increase your ROI.
- Access levels that match your needs (this could be a couple of times a month or no access for a year or more, depending on what makes sense for your financial plan).
Benefits of having both a checking and savings account
Having both types of accounts means you can access your money and capitalize on interest at the same time.
You can:
- Use your checking account to pay bills.
- Have a debit card that’s suitable for making point-of-sale purchases or withdrawing cash at an ATM.
- Earn interest on money that you don’t need to access for day-to-day use.
- Send money from checking to savings, gradually increasing your emergency fund or steadily marching toward an important savings goal.
Should I have my checking and savings accounts at the same bank?
Opening checking and savings accounts at the same bank can be convenient, and you may even save on transfer fees as you funnel money from one account to the other. You may also find better terms if you open a checking account at one bank or credit union and then open your savings account at a bank that offers a higher APY.
Many banks now offer mobile apps that allow stress-free multi-bank transfers. You may have to pay a fee, however, if you need to send money from bank A to bank B. Still, transactions are typically processed quickly and it may be worth the occasional fee to reap the benefits of an exponentially higher interest rate. This is something you’ll have to factor in when you make your decision.
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