Checking Account vs. Savings Accounts

Shawn Plummer

CEO, The Annuity Expert

When it comes to personal finance, there are a lot of important decisions to make. One of the most important is whether to open a checking account or a savings account. Both accounts have unique benefits, so deciding which is right for you can be tough. In this guide, we will discuss the pros and cons of checking and savings accounts so that you can decide which type of account is best for you!

Checking vs. savings account features

Checking and savings accounts are two joint bank accounts offered by financial institutions. Here are some of the key features and differences between the two:

  • Purpose: A checking account is primarily used for transactions such as paying bills, making purchases, and withdrawing cash. A savings account is typically used for saving money over a more extended period, aiming to earn interest on the balance.
  • Access: Checking accounts typically provide easy access to your money through a debit card, checks, and online banking. Savings accounts may restrict how often you can withdraw money without penalty, typically limiting the number of monthly transactions to six.
  • Interest rates: Checking accounts usually have lower interest rates, or no interest at all, while savings accounts generally offer higher interest rates to incentivize saving.
  • Fees: Some checking accounts may have monthly service fees or require a minimum balance to avoid fees, while savings accounts may charge fees for excessive withdrawals or if the account falls below a certain balance.
  • Overdraft protection: Checking accounts may come with overdraft protection, which allows you to overdraw your account up to a certain limit, while savings accounts typically do not.
  • FDIC insurance: Both checking and savings accounts are typically insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000 per depositor per insured bank.
Checking Vs. Savings Account Features

Earn The Highest Interest Rates On Savings Today

Fixed annuities are almost identical to Certificates of Deposit (CDs) accounts and provide higher interest rates and penalty-free withdrawals for income.

TermInsurance CompanyInterest Rate
N/AUFB Bank Savings Account5.02%
N/AUFB Bank Money Market5.02%
12 MonthsWestern Alliance Bank CD5.01%
36 MonthsOceanview Fixed Annuity5.00%
48 MonthsAmerico Fixed Annuity5.05%
5 YearsAspida Fixed Annuity5.50%
6 YearsAmerican National Fixed Annuity5.45%
10 YearsAmerican National Fixed Annuity5.45%
*Fixed annuities are only for saving money to use in retirement.

Disclaimer: This is a review. The Annuity Expert is not associated with a bank or credit union. However, fixed annuities are sold at most financial institutions. We aim to help you find the highest interest rates for your retirement savings. We may receive a small referral fee if you purchase something using a link in this article.

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Benefits Of A Savings Account

Here are some of the critical benefits of a savings account:

  • Interest earnings: One of the primary benefits of a savings account is earning interest on your deposited funds. While interest rates on savings accounts may not be as high as some other investment options, they can still provide a relatively low-risk way to earn some return on your money.
  • Convenience: Savings accounts are easy to open and manage, with many banks offering online and mobile banking tools to help you track your account activity and balance.
  • Safety: Savings accounts are generally considered safe to store your money, as they are typically insured by the Federal Deposit Insurance Corporation (FDIC) for up to $250,000 per depositor per insured bank.
  • Access to funds: While savings accounts may restrict how often you can withdraw funds without penalty, they offer a relatively easy way to access your money when needed.
  • Building savings habit: A savings account can help you build a habit of saving money over time, whether you’re saving for a specific goal or just building up an emergency fund.
  • Automatic savings: Many savings accounts allow you to set up automatic transfers from your checking account to your savings account, making it easy to save a portion of your income regularly.

Benefits Of A Checking Account

Here are some of the critical benefits of a checking account:

  • Convenience: Checking accounts provide easy access to your money through a debit card, checks, and online banking. This makes making purchases, paying bills, and withdrawing cash easy.
  • Safety: Checking accounts are generally considered a safe place to store your money, as they are typically insured by the Federal Deposit Insurance Corporation (FDIC) for up to $250,000 per depositor per insured bank.
  • Overdraft protection: Many checking accounts offer overdraft protection, which allows you to overdraw your account up to a certain limit. This can help you avoid costly overdraft fees and ensure your transactions are always covered.
  • Bill pay: Many checking accounts offer bill pay services, allowing you to pay bills online or through mobile banking easily.
  • Direct deposit: Many employers offer direct deposit, which allows you to have your paycheck deposited directly into your checking account. This can save you time and make it easier to manage your finances.
  • Rewards: Some checking accounts offer rewards for using your debit cards, such as cashback or points that can be redeemed for merchandise or travel.

Checking account vs. savings account types

A checking account is designed for day-to-day transactions, such as making purchases, paying bills, and withdrawing cash. Checking accounts often come with a debit card and checks, and they typically offer easy access to your funds through online and mobile banking tools. In addition, some checking accounts may offer overdraft protection and rewards for using your debit card.

On the other hand, a savings account is designed for saving money over a more extended period. Savings accounts typically offer a higher interest rate than checking accounts, which can help you earn some return on your deposited funds. However, savings accounts often restrict how often you can withdraw money without penalty and may require a minimum balance to earn interest.

Checking Account Vs. Savings Account Types

What Are The Different Checking Account Types?

Banks and financial institutions offer several different checking accounts, each with unique features and benefits. However, here are some common types of checking accounts:

  • Basic checking accounts: These are simple, no-frills accounts that offer basic features and may have low or no fees.
  • Interest-bearing checking accounts: These accounts typically offer a small amount of interest on the balance and basic checking features.
  • Rewards checking accounts: These accounts offer rewards, such as cashback or points, for using your debit card or meeting certain requirements.
  • Online checking accounts: These accounts are designed to be managed online, with no physical branches, and may offer lower fees and higher interest rates.

What Are The Different Savings Account Types?

There are several different types of savings accounts offered by banks and financial institutions, each with its own unique features and benefits. However, here are some common types of savings accounts:

  • Traditional savings accounts: These are simple accounts that offer basic savings features, such as a higher interest rate than a checking account.
  • Money market accounts: These accounts typically offer a higher interest rate than a basic savings account but may require a higher minimum balance.
  • High-yield savings accounts: These accounts offer a higher interest rate than a basic savings account, often with no minimum balance requirement.
  • Certificate of deposit (CD) accounts: These accounts require you to deposit your money for a set period of time, typically ranging from a few months to several years, and offer a fixed interest rate. However, you cannot withdraw your money before the end of the term without penalty.

What Do You Need to Open a Checking or Savings Account?

The requirements to open a checking or savings account can vary depending on the bank or financial institution, but here are some everyday items you may need:

  • Personal identification: You will need a government-issued photo ID, such as a driver’s license or passport, to verify your identity.
  • Social Security number: You will need to provide your Social Security number for tax and account reporting purposes.
  • Proof of address: You may be required to provide a recent utility bill or other proof of your current address.
  • Initial deposit: You may be required to make an initial deposit to open the account, which can vary depending on the type of account and the bank’s policies.
  • Employment information: You may be asked to provide information about your employment, such as your employer’s name and your job title.
  • Contact information: You must provide your phone number and email address to set up online and mobile banking access.

Are interest rates fixed on savings and checking accounts?

Interest rates on savings and checking accounts can be either fixed or variable, depending on the type of account and the bank’s policies.

Fixed interest rates stay the same for the entire term of the account, regardless of changes in market conditions or the bank’s policies. Fixed rates are typically offered on term deposits or certificates of deposit (CDs), which require you to lock in your money for a specific period of time in exchange for a guaranteed interest rate.

Variable interest rates, on the other hand, can fluctuate over time based on changes in market conditions or the bank’s policies. Most savings accounts and some checking accounts have variable interest rates. The interest rate on a variable rate account can go up or down depending on changes in the prime rate, which is the rate that banks charge to their most creditworthy customers.

Could I lose my money in a checking or savings account if the bank fails?

In the United States, the Federal Deposit Insurance Corporation (FDIC) insures deposits in checking and savings accounts up to $250,000 per depositor, per insured bank. If a bank fails, the FDIC will typically step in to protect depositors’ funds and ensure they are reimbursed up to the insured limit.

Not all banks are FDIC-insured, so it’s important to check whether the bank you are considering is insured by the FDIC or another federal or state agency. Additionally, if you have deposits over the FDIC insurance limit, you may not be fully reimbursed for all of your funds in the event of a bank failure.

That said, bank failures are relatively rare, and the FDIC has a strong track record of protecting depositors’ funds. It’s also important to remember that most banks are financially stable and are committed to safeguarding their customers’ deposits.

Next Steps

Overall, when it comes to personal finance and deciding which type of account is best for you, there are a lot of considerations to make. Whether you decide to go with a checking or a savings account – or even both – make sure you understand all the associated fees and benefits to get value out of the account. Shopping around can also mean saving considerable time, so don’t be afraid to look at online banking options that offer low fees and higher interest rates. Finally, suppose you’d like more help exploring your options for financial products such as checking accounts; contact professionals in the industry who can provide personalized solutions explicitly tailored to your individual needs. In that case, we can provide a free quote from an expert who will provide tailored advice just for you!

Checking Account Vs Savings

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Frequently Asked Questions

Is money safer in checking or savings?

Savings accounts are typically considered safer than checking accounts.

What is the difference between a checking and a savings account?

Checking accounts are for everyday spending, while savings accounts are for storing money and earning interest.

Can I use a checking account as a savings account?

Yes, but it may not be the best option due to lower interest rates.

Are debit cards checking or savings?

Debit cards are associated with checking accounts.

What are the advantages of using a credit union for a checking account versus a traditional bank?

Credit unions may offer lower fees and higher interest rates on checking accounts and provide more personalized customer service than traditional banks.

What happens if I put savings instead of checking?

If you deposit into a savings account instead of a checking account, the funds will be credited to your savings account and won’t be available for spending as they would be in a checking account.

What is the three difference between checking and savings account?

Checking accounts are for everyday spending, while savings accounts are for storing money and earning interest. Savings accounts typically offer higher interest rates but have more limited access to funds. In addition, checking accounts often come with debit cards and checks, while savings accounts typically do not.

Is a checking account good for saving money?

Checking accounts may not be the best option for saving money due to lower interest rates.

How does the annual percentage yield (APY) on a savings account differ from the interest rate on a checking account?

The annual percentage yield (APY) on a savings account is typically higher than the interest rate on a checking account, as savings accounts are designed for longer-term deposits and tend to offer higher returns on your money.

Shawn Plummer

CEO, The Annuity Expert

I’m a licensed financial professional focusing on annuities and insurance for more than a decade. My former role was training financial advisors, including for a Fortune Global 500 insurance company. I’ve been featured in Time Magazine, Yahoo! Finance, MSN, SmartAsset, Entrepreneur, Bloomberg, The Simple Dollar, U.S. News and World Report, and Women’s Health Magazine.

The Annuity Expert is an online insurance agency servicing consumers across the United States. My goal is to help you take the guesswork out of retirement planning or find the best insurance coverage at the cheapest rates for you. 

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