Checking Account vs. Savings Account: Which is Best for You?

It’s a tale of the present and future: A checking account is a great option for addressing your present financial needs, while a savings account is a great option for addressing your future financial needs.

Expert Take: A checking account makes the most sense for someone who wants to park money for everyday expenses and enjoy the ability to freely use checks, debit cards and ATMs. Meanwhile, a savings account is ideal for someone seeking to earn interest on money being put aside to achieve long-term financial goals.

Checking Account

For many Americans, a checking account represents the foundation of their financial lives. A checking account offers a place for you to keep your money to cover everyday expenses, enabling you to write checks, use a debit card or make electronic transfers.

Pros

• Ability to write checks and use debit card
• Easy access to money
• Insured deposits

Cons

• Usually no ability to earn interest
• Potential for monthly fees
• Possible minimum balance requirement

Savings Account

A savings account gives you a way to stash money that’s earmarked for long-term financial needs. For example, this type of interest-earning account can be your home for an emergency fund, a down payment for a house or the purchase of a car.

Pros

• Generally higher interest rates than checking accounts
• Potentially no initial deposit
• Insured deposits

Cons

• Normally no debit card attached
• Usually no check-writing capabilities
• Potential monthly withdrawal limit

What Is a Checking Account?

A checking account that you open at a bank, credit union or other financial institution lets you safely set aside cash for everyday purposes like covering the rent, buying groceries or paying utility bills. With this type of account, you generally can use a debit card or checks for purchases and can accept deposits like paychecks and government benefits.

What Is a Savings Account?

A savings account allows you to safely put aside money for future financial needs, including vacations and college expenses. Unlike a typical checking account, a typical savings account pays interest on the money you’ve accumulated.

Vault’s Viewpoint on Checking vs. Savings

Checking and savings accounts are two of the most basic bank accounts you can open, but they serve different purposes. A checking account is geared primarily toward meeting immediate financial needs, while a savings account is designed mostly for reaching long-term financial goals.

Who Are Checking Accounts Best For?

A checking account provides easy access to money you need for everyday spending, particularly since this type of account normally offers a debit card for purchases and ATM withdrawals. But if you’re looking to save money for the future and earn interest, a checking account probably isn’t the best option. Checking accounts usually don’t pay interest since they’re meant for covering short-term expenses and making short-term deposits.

Who Are Savings Accounts Best For?

A savings account is best for someone who’s eyeing long-term financial goals like covering the down payment on a new home or stockpiling cash in case of an emergency. As a result, it’s not the ideal option for everyday financial needs. Why? Because most savings accounts don’t issue debit cards or checks.

Checking Account vs. Savings Account Differences

• Interest: Checking accounts typically don’t pay interest, while savings accounts do. And when they do pay interest, checking accounts normally offer lower interest rates. As of December 2023, the average national interest rate for an interest-bearing checking account was 0.07%, compared with 0.46% for a savings account.
• Debit card: Checking accounts normally provide debit cards for making ATM, in-store and online transactions. On the other hand, savings accounts generally don’t come with debit cards.
• Checks: As the name suggests, checking accounts let you write checks. However, savings accounts normally don’t provide check-writing privileges.
• Access to cash: Checking accounts generally don’t limit the number of withdrawals you can make per month. Savings accounts, on the other hand, might impose a limit of six withdrawals per month.

Who Should Consider an Alternative?

If you’re interested in a hybrid between a checking and savings account, consider a money market account.

A money market account often provides a higher interest rate than a traditional savings account while also allowing you to write checks. As of December 2023, the average national interest rate for a money market account stood at 0.64%, compared to 0.46% for a traditional savings account.

If you’re simply searching for a place to save money, look into a savings account known as a certificate of deposit (CD). In exchange for an interest rate that’s well above what you’d get with a traditional savings account, you agree to lock up your money for a certain period (like six months or two years). You might face a financial penalty if you pull money out of a CD before that period ends.

Another option: high-yield savings accounts and high-yield checking accounts. High yield-checking accounts, in particular, are harder to come by, but either may offer APYs north of 5%.

What Are Some Other Factors To Consider?

When you’re comparing checking and savings accounts, don’t overlook the following four factors.

ATMs

When you’re considering a checking or savings account, be sure to look at how and where you can withdraw money from an ATM. While a checking account generally comes with a debit card that can be used at an ATM, a savings account normally doesn’t offer a debit card but might provide an ATM card. Neither card may do you much good if your financial institution has limited access to an ATM network.

Further, keep in mind that many online banks don’t operate their own ATMs. However, they might partner with ATM networks.

Fees

Regardless of whether you’re opening a savings account or checking account, study the fees. Does the account charge a bunch of fees? If so, you might want to hunt for an account that advertises low or no fees. Fees to look out for include:

• Account maintenance fees
• Minimum balance fees
• ATM fees
• Overdraft fees
• Foreign transaction fees

You tend to find low or no account fees at community banks, online banks and credit unions.

Deposit and Balance Requirements

In some cases, a checking or savings account may require you to make a minimum deposit or maintain a minimum balance. A minimum deposit requirement might be $25 to $100, for instance, while a minimum balance requirement might be as high as $500.

To get the most out of your checking or savings account, find a financial institution that doesn’t require a minimum deposit or minimum balance. In many cases, an online bank will be your best bet for avoiding these requirements.

Customer Service

Let’s say a checking account or savings account supplies all the things you’re seeking, except the financial institution doesn’t offer the best customer service. Before opening an account, check with friends, relatives and colleagues and read online reviews to get a sense of how the financial institution will treat you as a customer.

Among the financial institutions that earn high marks for customer satisfaction are:

• Ally Bank
• American Express
• Capital One
• Charles Schwab Bank
• Chase Bank
• Discover Bank
• Marcus by Goldman Sachs
• TD Bank