Checking Account vs. Saving Account: What’s the Difference?

Checking and savings accounts serve different purposes and there can be advantages to having both types of accounts. When you need access to your money for everyday spending, your checking account makes it easy to make purchases or get cash at an ATM with your debit card. When you’re looking to put some money away for a rainy day, your savings account can keep it socked away so you don’t accidentally dip into it, and you could earn interest on it too.

At financial institutions, such as banks and credit unions, you can open both types of account, and it may not be a case of ‘checking vs savings’. You might find a place for both in your financial plan.

In this article, we’ll cover:

• Checking account basics
• Savings account basics
• Why you should have both

What is a checking account?

A checking account is an account at a financial institution, like a bank or credit union, that allows you to make deposits and withdrawals, also known as credit and debit transactions. Checking accounts are considered a liquid asset because you can take your money out easily. Generally, checking accounts offer both check-writing capabilities and a debit card. Account holders tend to use this kind of account for everyday expenses and paying bills. 

Banks and credit unions often offer several varieties of checking accounts, some of which may require minimum balances and/or charge fees for things like monthly maintenance, overdrafts, ATM usage, and international transactions. Every institution has different options and fees. 

Features of a checking account

Having a checking account makes it easy to deposit and withdraw your money as frequently as you need to. While every bank offers different options, most checking accounts come with a set of basic features: 

• Automatic payments: Often, you can use your checking account to set up recurring payments to merchants or other service providers. Automatic payments can be a convenient way to handle utility bills and other monthly expenses. 
• Checks: A check is a legal document that instructs your bank to pay a specific amount to a designated payee. While paper checks are less common these days, most banks offer them as an option with checking accounts. 
• Direct deposit: You may authorize your checking account to receive a direct electronic transfer of funds, as opposed to a physical check. For example, many employers give employees the option to have their paychecks deposited directly into their bank accounts instead of being paid with a paper check.
• Debit card: Your debit card draws money electronically from your checking account for making purchases; you can also use it to get cash at an ATM.
• Mobile/online banking: Many banks offer the option to access your checking account from your mobile device or computer with a secure login and password. There are also many online-only banks, which have no physical branches. 
• Overdraft protection: Also referred to as cash-reserve checking, overdraft protection is a service that provides a cushion in the event that there are insufficient funds in your checking account to complete a transaction. Many banks offer this option and may charge a fee for the service and/or require you to have a savings account at the institution.

When you’re shopping around for a checking account, keep an eye out for the features that matter most to you based on your personal circumstances. For example:

• If you use cash frequently, you might benefit from an account that provides reimbursement for ATM fees. 
• If you don’t have a lot of money left over at the end of each month, you might prioritize an account with no minimum balance requirement. 
• Another consideration is monthly maintenance fees and other types of fees the bank charges; they can eat into your balance over time.  

Common types of checking accounts

There are a variety of common checking account types. While they all serve the same basic purpose, each provides different options that may be beneficial based on your individual needs. 

• Basic checking: This type of account allows you to do the primary things you expect a checking account to do: deposit and withdraw money, write checks, receive direct deposits, and use your debit card. Some banks offer a basic checking account with no monthly maintenance fee; be aware that even if such an account is advertised as “free checking,” it may still come with fees for things like overdrafts or foreign transactions. 
• Student checking: Designed for students in high school, college, or vocational school, this type of account works like a basic checking account but offers perks for people under the age of 25. These features might include low or no monthly fees or minimum balances, or connection to a student ID to make on-campus purchases more convenient.
• Rewards checking: Some checking accounts provide rewards like points, cash, or stock for debit card purchases. The advantage of these accounts is that you get something of value without having to do anything other than use your account for your regular spending. 
• Interest checking: Some institutions offer checking options that pay interest on the money in your account, typically on a monthly basis. This can be appealing if you often keep a higher balance in the account. Bear in mind that interest rates vary from bank to bank, and they fluctuate based on the state of the economy.

What is a savings account?

A savings account is a deposit account, usually interest-bearing, held at a financial institution. Though the interest rate for savings accounts is often modest, it allows your money to grow while it’s sitting in the account. Savings accounts provide a safe way to stash money away for short- to mid-term financial goals, like a vacation or down payment on a car. Savings accounts are also ideal for putting aside money that you can access quickly for emergencies. 

Just like checking accounts, you’ll find various options for savings accounts at different financial institutions. You’ll commonly need to deposit a minimum amount of money to open the account and maintain a minimum balance. Fees vary based on the institution and account type and may include charges for things like monthly maintenance, excessive withdrawals, and inactivity.   

Features of a savings account

The main difference between a checking vs. savings account is that the latter is designed for keeping your money in the account for a longer time period instead of spending it frequently. Some of the common features of savings accounts reflect this purpose: 

• Interest: Nearly all savings accounts are interest-bearing; the longer you leave your money in the account, the more it will grow. Interest rates vary by the financial institution, and they can go up or down at any time, usually based on inflation or other changes in the economy.
• Withdrawal limits: Many savings accounts charge a fee if you make more than six withdrawals per month. This limit was once required by the Federal Reserve; it’s now optional, but several banks still impose the limit. 
• No debit card: Most savings accounts don’t come with a debit card since they’re not intended to be used for regular spending. That said, if you have a checking and savings account with the same bank, you might be able to use your debit card to deposit or withdraw money from your savings account at an ATM. 

Savings accounts do share some common features with checking accounts, including the option to receive direct deposits and access mobile/online banking. 

Consider your reason for saving and personal circumstances when looking at options. For example:

• The longer you can leave your money in the account, the more it grows, and the more you benefit from compound interest. So if you’re saving up for a specific goal, you might want to look for accounts with higher interest rates.   
• If you’re using your savings account as an emergency fund and are concerned that you may need to make a lot of withdrawals if disaster strikes, you may want an account with no fees for excessive withdrawals. 
• If you don’t have a lot of money you can put into savings at first, look for options with a low or no minimum amount required to open the account so you can start earning interest right away.  
• You also might want to compare any account maintenance fees with the amount of interest your balance will earn. If you’re spending more on fees than you make in interest, an account without maintenance fees may be a smarter choice.  

Common types of savings accounts

As with checking accounts, there are several types of savings accounts available to meet your specific needs and priorities. 

• Traditional savings account: This standard account is an accessible way to store your money and grow it with modest interest. You’ll find lots of options with different minimum balance requirements and fees at different financial institutions, so if you’re new to saving or don’t have a lot to put aside right now, this can be a good option to start a savings habit. 
• High-yield savings account: This account helps your money grow more quickly because the annual percentage yield (APY) is usually 10 to 20 times higher than that of a traditional savings account. High-yield savings accounts often have a higher minimum balance; if you have enough money to meet the requirement, you can benefit from the higher interest rate.
• Money market account: Money market accounts can be seen as a sort of hybrid of checking and savings accounts. They come with checks and, often, debit cards, like a checking account. They’re similar to savings accounts in that they earn interest and generally have transaction limits. Money market accounts usually have higher interest rates than traditional savings accounts, and often have a tiered system in which interest rates vary based on your balance. This type of account can be useful if you want the benefit of earning interest and the convenience of spending money with checks or a debit card.

Checking vs savings accounts: the importance of having both

When you’re looking into banking options, it’s not a question of choosing a checking vs savings account. They each serve a different purpose and having both can be an important way to manage your money and work toward your financial goals. Your checking account allows you to easily pay bills and day-to-day expenses with your debit card. If you use a budgeting app, you can connect it to your checking account to help plan and track your spending.  

By also opening a savings account, you can tuck money aside for the future in a spot where you won’t accidentally spend it, and reach your financial goals faster by earning interest. A savings account can also help you feel more financially secure, since you can easily access the money you’ve put aside in case of an emergency.

Stash offers online banking designed to help you manage your spending, save for goals, and build your investment portfolio with the Stock-Back^® card. It’s all powered by Stash Core, a world-class infrastructure platform that’s designed to empower everyday Americans to invest and build wealth.   

FAQ

What is better, a savings account or checking?

It depends on what you want to use your bank account for. A savings account is designed to put away money for short- or mid-term goals, like saving up for a new fridge or tattoo. A checking account is ideal for your regular expenses, like paying bills and buying groceries. In many cases, it’s useful to have both.

Is a savings account the same as a checking account?

No, they are different types of accounts, with different features and requirements. Checking accounts usually have no limit on transactions and come with a debit card you can use for spending. Savings accounts often limit the number of withdrawals you can make and usually don’t allow you to use a debit card for making purchases. 

Is a debit card checking or savings?

Debit cards usually come with a checking account. Most savings accounts don’t come with a debit card, but some banks offer one. 

Is money safer in checking or savings?

As long as you’re banking with an FDIC-insured institution, which includes most banks and credit unions, your money is equally safe in a checking or savings account. The standard deposit insurance amount is $250,000 per depositor, per FDIC-insured bank, per ownership category.

Should my paycheck go to checking or savings?

You can have your paycheck directly deposited to either a checking or savings account. Many people have their paycheck go to their checking account because they want the money available to spend right away. Some employers will split your direct deposit between two accounts, so you could have a portion go into your savings account and the rest into checking. This approach can help you stick to your savings goals by removing the temptation to spend money you were planning to put aside.  

Should my checking and savings account be at the same bank?

You don’t have to use the same bank for checking and savings. Doing so could make it faster to transfer money between the two accounts, and you might find it more convenient to have a single login for accessing all your bank accounts online. However, you may find that one bank offers the best checking account for your needs, but the ideal savings account is at a different institution.