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Checking vs. Savings Account: Key Differences

Written by Jessica Merritt and Lauren Perez | Edited by Ali Cybulski | Published on 5/23/2024


Checking and savings accounts are basic tools for managing personal finances. A checking account holds your funds for day-to-day transactions, while a savings account grows your money over the long term.

Both have strengths and limitations. Compare checking and savings accounts to understand how to maximize their potential.

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Checking account vs. savings account

The difference between checking and savings accounts depends on what you plan to do with the money in the account.

Checking accounts are designed to meet everyday spending needs, such as making debit card purchases, writing checks and paying bills. Savings accounts are where you stash money for specific financial goals or your emergency fund.

Let’s compare checking accounts and savings accounts:

Checking Savings
What’s it ideal for? Spending Saving
Will you earn interest? Sometimes; minimal Yes; variable rates typically apply
Will you get a debit card? Yes No
Which fees are common? Monthly maintenance fees, overdraft fees, ATM fees Monthly maintenance fees, minimum balance fees, inactivity fees
Are there limits on transfers? Transactions of all types are typically unlimited Some banks charge a fee for going over withdrawal limits
Are deposits insured? Yes, up to at least $250,000 at FDIC- and NCUA-insured banks or credit unions Yes, up to at least $250,000 at FDIC- and NCUA-insured banks or credit unions

What is a checking account?

A checking account is a bank account intended for everyday spending. This financial workhorse allows you to easily make deposits, withdrawals and transfers.

Checking accounts can accept deposits, including cash or account transfers, from various sources. You can withdraw money using a check, an ATM, a debit card or an electronic transfer.

Most checking accounts come with debit cards and digital tools, such as online dashboards and apps for managing your money on your smartphone.

You can also set up direct deposit to automatically move your paycheck into your account and set up automatic payments for recurring bills.

The typical checking account includes fees, and you’ll want to ask the bank or credit union for a fee schedule before opening an account. Monthly service fees, ATM fees, overdraft fees, nonsufficient funds (NSF) fees and stop payment fees can be common.

Banks and credit unions may also offer sign-up bonuses for new customers who qualify. Checking accounts may earn interest on balances or provide rewards for debit card purchases as well.

What is a savings account?

A savings account is a deposit account used to build funds for long- and short-term financial goals. You might use a savings account for an emergency fund or a down payment on a home, for instance.

Compound interest will help your account balance grow steadily on its own. This means interest is paid on your account’s principal and accumulated interest.

However, savings accounts typically pay lower interest rates than options such as stocks, bonds or certificates of deposit (CDs). A high-yield savings account can offer better rates than a standard account, but it may require a large minimum account balance.

A savings account remains liquid while it grows. You can easily access your funds when needed by transferring from a linked account or withdrawing at an ATM or bank branch. Your bank may also allow you to link your savings and checking accounts for overdraft protection, which can help you avoid fees, bounced checks and declined transactions.

Keep in mind, though, that some banks limit monthly withdrawals from savings accounts. If you exceed the limit, you may owe a per-transfer fee or a fee for the month.

Also, as with checking accounts, opening a new savings account and meeting certain requirements could earn you a sign-up bonus.

How to choose a checking account

When you choose a checking account, weigh factors such as fees, minimum balances, bonuses, interest rates and ease of access to branches or ATMs. Fees and accessibility should be primary considerations.

You may be able to avoid some fees. Checking accounts often have monthly maintenance fees, but banks may waive them if you complete certain actions, such as maintaining a minimum balance, setting up direct deposits or switching account types.

Consider accessibility, or how easily you can get to your money. If you think you’ll need to visit branches often, find out whether the bank has locations convenient to you. Make sure you’ll have plenty of surcharge-free ATMs nearby.

A checking account that earns interest or offers a sign-up bonus can be a nice perk if your needs are otherwise met.

How to choose a savings account

The key considerations when choosing a savings account are interest rates, fees, bonuses and limits on transfers.

You’ll want to focus on the interest rate to earn as much cash as possible. High-yield savings accounts, typically offered by online-only banks, generally provide the best interest rates.

Tiered savings accounts deliver higher rates of return as your balance increases.

You can also use a sign-up bonus to earn more money with a savings account. Compare offers to help you choose accounts.

Look at fees. Savings accounts, like checking accounts, commonly come with monthly maintenance fees.

You may be able to avoid this fee by maintaining a minimum account balance, linking a savings account and checking account at the same bank, and setting up automatic monthly transfers from a linked account.

Finally, look into withdrawal limits on savings accounts. Some banks may allow only six withdrawals before charging a fee; check with the bank to see what types of transactions qualify.

Alternatives to traditional savings accounts

If you’re earning lackluster interest on your regular savings account, you have options. You can consider these alternatives to traditional savings accounts:

  • High-yield savings accounts. A high-yield savings account, usually from an online bank, may earn a higher interest rate than a regular savings account.
  • CDs. A CD is a type of savings account that typically offers higher interest rates than traditional savings accounts. With a CD, you agree to leave your money in the bank for a specific term, often six months to five years, without taking a withdrawal. Early withdrawals may incur a penalty.
  • Money market accounts. Money market accounts tend to have higher rates than other types of savings accounts and have features similar to checking accounts, such as the ability to use a debit card and write checks.
  • Cash management accounts (CMAs). These accounts are held at investment or brokerage firms and combine the features of checking and savings accounts. CMAs may earn higher interest rates than regular savings accounts and include debit cards, check-writing privileges and other features.

Should you consider a premium checking account?

Premium checking accounts usually offer more features or perks than regular checking accounts, but they may have higher fees or stricter requirements. For example, you might earn a higher interest rate and get ATM fees reimbursed, but you have to maintain a high balance or pay a maintenance fee.

A premium checking account may be worthwhile if you can meet the account requirements without a maintenance fee. This account may also be worth considering if the perks, such as free checks or ATM fee reimbursements, will save you more than the fees you’ll pay.

Compare the features and fees of a regular checking account with those of a premium account to see whether the benefits make a difference.

Should you have your checking and savings accounts at the same bank?

Keeping your checking and savings accounts at the same bank can be convenient. You can easily shift money between accounts, and you may qualify for more attractive rates on certain products.

You may want to consider moving funds to other banks if your account balances exceed — or nearly exceed — the federal deposit insurance limit. That means some of your money may not be covered by Federal Deposit Insurance Corp. (FDIC) or National Credit Union Administration (NCUA) insurance.

Splitting up your money across different banks can also be a protective measure. If someone fraudulently gains access to your account, you stand to lose more if all your cash is in one place. A second home for your money could offer peace of mind.

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