Checking vs. Savings Account: Here’s Exactly When to Use Each One

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When it comes to our finances, it can feel like our list of decisions is never-ending.

Should I start saving for retirement now? How should I file my taxes this year? Do I need homeowners and flood insurance?

To make any decision about money, it helps to have all the pertinent information.

When deciding whether to open a checking or savings account, you should start by knowing how they differ.

Checking vs. Savings Account: What Are the Differences?

Here are the major differences between a checking vs. savings account to consider before depositing your money.

How They’re Designed to Be Used

A checking account is designed to store the money you plan to spend, while a savings account is meant to hold your money for a relatively long time.

Checking Accounts

Use the money in this account for small and/or everyday purchases, such as buying groceries, going to the movies and filling up your gas tank.

Savings Accounts

Ideally, you don’t spend this money in the short term. You’d use it to build an emergency fund for, say, unexpected house repairs, or save for something big, like a car, wedding, house or college.

You don’t invest through a savings account, nor do you save for retirement here. You’ll want to open a separate retirement account to save for the future and invest.

How to Access Your Money

It’s typically easier to access your money through a checking account than it is through a savings account. 

Checking Accounts

You can spend or withdraw money in your checking account by:

  • Using a debit card: Paying with a debit card is the same as paying with cash; the money is withdrawn directly from your checking account. 
  • Writing a check: Although paying with paper checks is becoming less common, you can often make payments from your checking account with a check, too. 
  • Withdrawing cash from an ATM. 

Savings Accounts

Accessing money in your savings is a bit more difficult than acquiring cash from your checking account. You can:

  • Transfer money from your savings account to your checking account online: Even if your checking and savings accounts are at different banks or credit unions, it’s still possible to transfer money from one institution to another.
  • Withdraw from your savings account at an ATM: Using your debit card, you can withdraw money from your savings account at an ATM if your accounts are at the same bank or credit union. Just select “savings” instead of “checking” when the ATM prompts you to choose which account to withdraw from.

Withdrawal Limits

Unlike checking accounts, savings accounts have limits on the number of withdrawals you can make.

Checking Accounts

Checking accounts don’t have limits on how often you can withdraw money. You should be able to do so as many times as you want per month, provided you don’t overdraw your account. 

However, many accounts do have restrictions on how much you can withdraw from an ATM or spend with your debit card in a single day. These limits vary by banking institution and can range from a few hundred to several thousand dollars.

Savings Accounts

Federal law says you can only withdraw money six times per month from your savings account. However, this rule only applies to certain transactions, such as transferring money from your savings to your checking account and sending wire transfers to someone else.

When you’re withdrawing money from your savings account at an ATM or your bank, the limit does not apply.

Fees and Deposit Requirements

Fees and minimum deposits for both checking and savings accounts vary by institution.  

Checking Accounts

Some institutions have a minimum deposit to open a checking account, usually ranging from $25 to $100. It is possible to find a bank that doesn’t have a minimum to open an account, though.

Some banks and credit unions also charge monthly maintenance fees for checking accounts. However, if you also open a savings account with the same bank and/or maintain a minimum balance, many will let that monthly fee slide.

There are a few other fees associated with a checking account. Depending on your circumstances, you may have to pay:

  • Overdraft penalties. 
  • Card replacement fines.
  • Incoming/outgoing wire transfer fees.
  • Out-of-network ATM fees if you withdraw cash from an ATM that isn’t operated by your bank.

Savings Accounts

Many banks have a minimum to open a savings account. They also sometimes charge a monthly fee, but as with a checking account, they might waive it if you meet certain criteria, such as maintaining a minimum balance and/or having another account with the bank.

Remember the aforementioned limit of six withdrawals per month for saving accounts? Well, if you exceed that, you’re charged a fee. It’s usually under $15, but if this becomes a regular occurence, a bank may convert your savings account to a checking account.

Interest

Savings accounts usually pay slightly higher interest rates compared with checking accounts.

Checking Accounts

Checking account interest rates are notoriously low, with a national average of 0.06% as of Aug. 12, 2019, according to the Federal Deposit Insurance Corp. (FDIC). To clarify, that means you’d earn 6 cents per year on a $100 balance. 

There are accounts that offer interest rates that are higher than the national average known as high-yield checking accounts. Usually, though, those interest rates are still minimal, so to find an account that offers higher interest rates, most people focus on savings accounts.

Savings Accounts

Savings accounts are known for having higher interest rates than checking accounts, but they still aren’t much: The national average is 0.09% as of Aug. 12, 2019, or a mere 9 cents per $100. 

Because you theoretically leave money in a savings account for a long time, that money could build a decent amount of interest if you strategically choose a high-yield savings account.

  Checking Accounts Savings Accounts
Designed For Spending Saving for emergency funds or financial goals
Accessibility Debit card

Checks

ATM

Withdraw money at the bank

Transfer funds to a checking account

ATM

Withdraw money at the bank

Withdrawal Limits None Six times per month
Fees Fee to open account (sometimes)

Monthly maintenance fee (sometimes)

Overdraft fee

Card replacement fee

Wire transfer fee

Out-of-network ATM fee

*some fees may be waived

Fee to open account (sometimes)

Monthly maintenance fee (sometimes)

Withdrawal limit fee

Out-of-network ATM fee

*some fees may be waived

Interest Minimal to non-existent; rates vary Higher than checking; rates vary

Checking vs. Savings Account: Which Should You Open?

Ideally, you would have both a checking and a savings account. In your checking account, you’d keep money for small or everyday purchases, while in your savings account, you’d store money for emergencies and short- or long-term goals.

It’s worth considering whether you should open both accounts with the same bank or credit union. There are a few pros to keeping them at the same institution. For example, some places will waive fees if you have two accounts with them, and it’s easier to transfer money between accounts if they’re together.

However, after doing a little research, you may decide that one establishment seems better for a checking account, while a different one seems ideal for savings accounts. In fact, not all online banks and credit unions offer customers both types of accounts.

Your specific circumstances will affect your decision, as well. For instance, if you don’t own a car, you’ll probably want an account through an online company or at a brick-and-mortar bank within walking distance of your home.

Take a look at this list of the best checking accounts of 2019 and this list of the best savings accounts for the year. Hopefully, you’ll find your perfect matches and have all the information you need to make this financial decision.

Laura Grace Tarpley is a freelance writer based in Nashville. She has written for publications such as SoFi, FluentU and Roads & Kingdoms. Follow her on Twitter @lgtarpley.