Checking vs. Savings Accounts: What’s the Difference?

Jacqueline DeMarco

Writer

It’s very common to throw around the term “bank account” when referring to a checking account or a savings account, but these two accounts are actually very different.

The differences between checking and savings accounts come down to when you'll need the money. A checking account is essentially for spending money, while a savings account is for, you guessed it, saving money.

These accounts come with different features, requirements, and fee structures suited to each goal. For example, it’s much easier to access funds in your checking account, while you’re likely to earn more interest on deposits in your savings account, particularly if you opt for a high-yield savings account (which you definitely should).

Let’s take a closer look at how checking vs savings accounts work.

Erika Taught Me

  • A checking account is for money you'll use for everyday spending.
  • A savings account is for money you don't need right away, but want to keep safe.
  • Savings accounts earn interest, but checking accounts are easier to access.

Checking vs Savings accounts

A checking account is where you store money you need to keep accessible, such as the cash you need to pay your bills, buy groceries, or fill up your tank. You don’t want to keep too much money in your checking account because, typically, these accounts don’t offer interest on deposits. 

A savings account is a better fit for money you don't need for everyday spending. They are perfectly safe and can also earn decent interest. Savings accounts are FDIC-insured, which means that even if the bank goes out of business the Federal Deposit Insurance Corporation will ensure you get your money back.

Why do you need a checking account?

A checking account is a really convenient way to keep your money accessible without having to carry cash on hand. You want to keep the cash you plan to spend in the near future in your checking account.

You can access these funds in a few ways. You can always go to the bank or use an ATM to withdraw cash, but you also have the option to use a debit card or paper check to make purchases using funds in your checking account. Most banks also offer bill pay, which allows you to pay bills from the bank's website.

Ideally, your checking account will act as a safe place to keep the cash you need to spend on purchases you plan to make soon and pay bills. Your checking account is also likely to be the source for automatic payments for things like credit card bills and other subscription payments. You want to keep enough cash in your checking account to cover your living expenses, bills, and discretionary spending (like dining out).

If your employer offers it, you can also use your checking account to receive your direct deposit.

Why do you need a savings account?

A savings account is a great fit for setting aside money for an emergency fund, a down payment on a home, or any other financial goal (like paying for a wedding or a child’s education). Remember — you generally earn interest on the money you keep in your savings account. The more money you save and the longer you hold off on spending it, the more money you stand to earn with no effort on your part. 

Funds in your savings typically aren’t all that accessible (that’s kind of the point), so you don’t want to use this account to keep money you plan to spend any time soon. Most savings accounts have barriers in place to deter you from dipping into your savings too often — oftentimes, they limit the number of withdrawals to six per month. If you surpass that limit, you risk paying excess withdrawal fees or, in extreme cases, even having your savings account closed.

Related: How many bank accounts should I have?

What to look for in a checking account?

When it’s time to open a checking account, there are several important things to consider. One important consideration when it comes to checking is the fees. Here are some questions to ask yourself when comparing checking accounts.

  • Fees: Is there a monthly maintenance fee? Does the account offer overdraft protection, so you won’t be hit with overdraft fees?
  • Balance requirements: Is there a minimum balance requirement? If so, is it sustainable for you?
  • Accessibility: What ATMs can you use to withdraw cash? Are there fees for ATM withdrawals?
  • Account management: Does the bank or credit union offer a mobile app to make tracking your account easier?
  • Physical locations: Will you be able to go into a branch for an in-person banking experience (if that’s your jam)?
  • Features: Does the account offer bill pay and automatic payments? Are there any rewards or unique account holder perks?
  • Interest: Does the account balance earn interest? (Spoiler: most checking accounts do not earn interest — but it's not unheard of, so it’s still a factor worth considering)

Check out our list of the best checking accounts.

checking vs savings account: What's the difference?

What to look for in a savings account?

Like with a checking account, when looking for a new savings account you want to pay close attention to any potential fees and minimum balance requirements. What’s most important, though, is the interest rate — you’ll want to look for a great interest rate so you can watch your savings grow even faster. 

  • Interest: What’s the interest rate? While savings accounts with traditional banks typically earn little interest (the national average is 0.43%), high-yield savings accounts, usually from online banks, can offer anywhere from 3% to 5% APY on your balance.
  • Fees: Are there monthly maintenance fees? What about fees for inactivity, paper statements, or excess withdrawals? 
  • Balance requirements: Will you need to maintain a minimum balance?
  • Accessibility: Are you able to access your funds easily with an ATM card? Can you link it to a checking account?
  • Mobile app: Can you manage your account online or through an app? 
  • Savings tools: Does the account offer free analytics tools or automated savings features?
  • Physical locations: Are there branch locations for in-person customer support?
  • Security: Does the bank have FDIC insurance? If it’s a credit union, does it have NCUA insurance?

Check out our list of the best high yield savings accounts here.

FAQs

Should I have both a checking account and a savings account? 

Ideally, you will always have access to both a checking and a savings account. This is because these two types of bank accounts serve different — yet equally important — purposes. Your checking account is where you put money you want accessible for everyday purchases and bills, like your car payment or cleaning supplies. Your savings account is the best place to set aside money you don’t intend to touch for a while so you can avoid spending it and watch it grow. 

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

In most cases, it’s easiest to maintain a checking account and savings account at the same bank. Doing so can make transferring funds between these accounts easier. However, if you can earn a much higher annual percentage yield on savings deposits at another bank (like an online bank that offers a high-yield savings account), you may want to move some or most of your savings so you can earn as much money as possible on your savings. 

What are money market accounts?

A money market account is sort of a combination of checking and saving accounts. Typically, these accounts offer a competitive interest rate while also being easier to access than a traditional savings account. They often come with checks you can use to pay for things directly out of the account.

If you go this route, you'll want to be aware of any monthly fees or limits you may encounter.

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I'm an award-winning lawyer and personal finance expert featured in Inc. Magazine, CNBC, the Today Show, Business Insider and more. My mission is to make personal finance accessible for everyone. As the largest financial influencer in the world, I'm connected to a community of over 20 million followers across TikTok, Instagram, YouTube, Facebook and Twitter. I'm also the host of the podcast Erika Taught Me. You might recognize me from my viral tagline, "I read the fine print so you don't have to!"

I'm a graduate of Georgetown Law, where I founded the Georgetown Law Entrepreneurship Club, and the University of Notre Dame. I discovered my passion for personal finance after realizing I was drowning in over $200,000 of student debt and needed to take action-ultimately paying off my student loans in under 2 years. I then spent years as a corporate lawyer representing Fortune 500 companies, but I quit because I realized I wanted to have an impact; I wanted to help real people and teach them that you can create a financial future for yourself.

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Our aim is to help you make financial decisions with confidence through our objective article content and reviews. Erika.com is part of an affiliate sales network and receives compensation for sending traffic to partner sites, such as MileValue.com. This compensation may impact how and where links appear on this site. This site does not include all financial companies or all available financial offers. This in no way affects our recommendations or article content.

Advertiser Disclosure

Our aim is to help you make financial decisions with confidence through our objective article content and reviews. Erika.com is part of an affiliate sales network and receives compensation for sending traffic to partner sites, such as MileValue.com. This compensation may impact how and where links appear on this site. This site does not include all financial companies or all available financial offers. This in no way affects our recommendations or article content.

Advertiser Disclosure

Our aim is to help you make financial decisions with confidence through our objective article content and reviews. Erika.com is part of an affiliate sales network and receives compensation for sending traffic to partner sites, such as MileValue.com. This compensation may impact how and where links appear on this site. This site does not include all financial companies or all available financial offers. This in no way affects our recommendations or article content.