Many people are unaware of the difference between checking and saving accounts. As a result, you could choose an account that you may not need. So, what is the difference between checking and savings accounts?

That’s why before going to the bank, reading this article could help you understand what account is most suitable for your needs.

What Is A Checking Account?

This account is what you’ll use to deposit and withdraw money from your financial institution. You can also call it a transactional or demand account because you use it for your day-to-day spending. Moreover, it’s easily accessible via electronic debits, automated teller machines, or checks, making it very liquid, too.

What makes it different from other accounts is that a checking account doesn’t limit your deposits and allows you to make numerous withdrawals.

What is a checking account used for?

Basically, you can use a checking account to keep your money for a medium and short-term period. You can also use it for bills payments, link it to payment apps, and let your employer directly deposit your check in it. These functions make this account suitable to manage your financial tasks easier.

There are also various types of checking accounts to choose from. Below are some of them:

1. Checkless Checking

As its name sounds, you can do all your transactions without paper checks. Instead, you can use online, mobile, or debit cards. You can choose this type if you don’t maintain a large fund or you’re not regularly issuing cheques.

2. Rewards Checking

This checking account lets you earn rewards for every purchase you make. It’s like a rewards credit card that provides cash backs when you schedule direct deposits to pay bills and make purchases. Moreover, some financial institutions have rewards checking to earn interest from your funds.

3. Interest Checking

If you want a guarantee to earn interest from your funds, an interest checking account is available. However, the rate of interest varies per financial institution. Some offer competitive interest rates, while others let you earn depending on your maintaining balance.

4. Standard or Traditional Checking

With this checking account, you can have a debit card to make purchases, write cheques, or pay bills. Generally, you’ll be paying a maintenance fee if you can’t maintain the bank’s required minimum balance. You also need to pay a minimum deposit when opening an account.

What is the difference between checking and savings accounts

What Is A Savings Account?

This account is best for keeping your money to save for your future needs. It also allows you to enjoy compounding interest on your balance. But unlike a checking account, you can’t write cheques using a savings account.

What Is A Savings Account Used For?

The main benefit of opening a savings account is to enjoy higher interest rates. It’s also a way to secure your fund for plans or goals like a down payment for a house, buying a car, or educational fund for your children.

When using this account, the financial institution will set a period before you can withdraw your savings. For instance, you may not withdraw your savings for three years. Doing so will make you pay for charges or fees. As a result, you can become more financially disciplined as you can cut unnecessary spending upon receipt of your income since it can directly go to your savings account.

Checking vs. Savings Accounts

 Checking accountSavings account
UsageGrocery or other daily shoppingBills paymentSaving for big purchases like a car, vacationGrowing an emergency fund  
InterestMinimal interest, but some doesn’t provide oneDifferent banks offer different interest rates
ChargesATM withdrawal fee, overdraft fee, maintenance feeSavings withdrawal limit fee, minimum balance charge, maintenance fee
Required Minimum BalanceDepending on the financial institutionVaries by bank
Limits on transfersNoneGenerally, you only enjoy a maximum of six statements per month
Breakdown of differences between checking and savings accounts.

How To Know If My Account Is Checking Or A Savings Bank Of America?

If you have an account in the Bank of America, you can quickly know if it’s a checking or savings account. A savings account’s primary purpose is to help you save money for your financial goals. Meanwhile, a checking account is for daily transactions that allow you to make unlimited withdrawals and deposits.

But if you can only withdraw or deposit money in an account at most six times per month, you have a savings account. Or, if you issue cheques, you have a checking account since you can’t issue one using a savings account.

Is It Better to Have a Checking or a Savings Account?

Now that you know how to identify a checking or a savings account, you can also gauge better what type is most suitable for your needs.

For instance, go for a savings account to reach a financial goal. But if you’ll need an account for your daily transactions, a checking account should be your priority. If you have a business and use cheques for your financial transactions, a checking account is also better.

However, it may be better to have both accounts. One that lets you save and another for your unlimited financial transactions. Resources such as BankRate.com can help you differentiate between competitive offerings featured at banks.

Takeaway FAQs for the article:

Is a debit card a checking or savings account?

As mentioned, you use a checking account for your daily spending. You use it to pay bills or send cash through payment platforms. And you can do these transactions using a debit card linked to your checking account.

This means you’ll be using the balance in your checking account by withdrawing or swiping your card through an ATM or cashier’s register. The card used in such is the debit card.

Which is safer, a checking or savings account?

The answer to this question relies on where you’ll open your account. Whatever account it is, it can be unsafe if the provider isn’t Federal Deposit Insurance Corporation (FDIC) insured.

That’s why before opening an account, you must ensure that the bank is FDIC insured. This means that the bank will be insured against fraudulent and unauthorized transactions, keeping your money safe.

Moreover, the safety of an account will also depend on you. You should avoid exposing your account to anyone to prevent them from getting access to your funds.

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