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The Difference Between a Checking and a Savings Account—A Detailed Comparison


The Difference Between a Checking and a Savings Account—A Detailed Comparison


Savings and checking accounts are both great options if you want to keep your money safe and enjoy the flexibility of accessing your funds whenever you need them. Still, these accounts differ in their features and perks, from interest rates and withdrawal limits to debit cards and digital payments. So, they may not both be suitable for all financial needs.

In this guide, we’ll reveal the main difference between a checking and a savings account, explore the pros and cons of both, and help you find the best account option for you.

What Are the Main Differences Between Checking and Savings Accounts?

The primary difference between a checking and a savings account is their purpose. Checking accounts are designed to help you access money for daily use, while savings accounts are used for saving money and earning interest in the process. Besides this main distinction, a checking and a savings account differ in the features they offer, like:

FeatureSavings AccountChecking Account
Debit cardNot availableAvailable
ChecksNot availableAvailable
Digital wallet compatibilityNoYes
WithdrawalsLimitedUnlimited
Interest rateEither low or noneHigher than that of a checking account

The only accounts that combine the features of both checking and savings accounts are money market accounts (MMAs). They allow you to earn interest on the saved funds but may also provide you with a debit card and allow you to write checks.

Checking Account vs. a Savings Account—What Are They & How Do They Work?

While there are many differences between a checking and a savings account, people often confuse them because they also have many similarities. For example, both are available at banks and credit unions and are FDIC- or NCUA-insured. Plus, both accounts offer easy access to cash and have routing and account numbers, allowing you to send and receive money.

To help you understand why users usually settle for one of these accounts over the other, we’ll answer the two main questions:

  1. What’s a checking account?
  2. What’s a savings account?

What Is a Checking Account?

Checking accounts are designed to help you make payments and credit/debit transactions. They’re great for everyday use because they have no withdrawal limits, typically include a debit card, and often allow you to make digital payments and write checks. This means you can:

  • Withdraw funds from ATMs
  • Use a debit card to make purchases
  • Pay bills electronically or using checks
  • Transfer money to other bank accounts

However, checking accounts often come with fees for monthly maintenance, ATM use, or checks. Before you open a checking account, find out which fees your financial institution may impose.

As for interest rates, checking accounts either pay no interest or offer low interest rates. Recent data published by the FDIC reveals that the average interest rate for checking accounts is 0.08%, while savings accounts offer a rate of 0.45%. So, if you’re looking for a way to increase your earnings while keeping money safe, a savings account is a better option.

What Is a Savings Account?

While checking accounts are made for daily use, savings accounts keep your money safe and help you grow wealth over time. Investing money in these accounts can help you save funds for short- and long-term goals like:

  • Growing an emergency fund
  • Collecting money for a vacation
  • Setting money aside for a home improvement project

What makes savings accounts suitable for such financial goals is the interest you earn by keeping money in your account. The longer your funds remain in the account, the more interest you’ll accrue. Plus, if you want to make higher earnings, you can opt for high-yield savings accounts—their annual percentage yield (APY) currently ranges from 4.50% to 5.30%, which is much higher than the national average rate of 0.45%.

Traditional savings accounts aren’t as strict as certificates of deposit regarding withdrawal limits, but they typically include monthly limits. In most cases, you can’t withdraw funds more than six times a month.

Most savings accounts also include fees for monthly maintenance, overdraft fees, or wire transfer fees. Still, the interest you earn while keeping money in a savings account is often higher than the fees you might have to pay.

How Do You Know if You Have a Checking or a Savings Account?

The easiest way to tell if you have a checking or a savings account is the presence of a debit card. If you have one, you have a checking account—savings accounts don’t issue debit cards. However, you can also answer this question by:

  • Looking at your bank paperwork—Your bank statements or the account opening documentation typically states what type of account you have
  • Contacting your financial institution—You can either contact your bank’s customer service or visit their branch in person to ask about your account type

Is a Savings Account Safer Than a Checking Account?

Your funds will remain safe whether you choose a checking or a savings account. Both accounts are insured by either the Federal Deposit Insurance Corporation (FDIC) if you have a bank account or the National Credit Union Administration (NCUA) if you open an account at a credit union. This means that if your bank/credit union fails, you’ll be reimbursed up to $250,000.

Both options also include built-in security features like:

  • Passwords
  • Online security protocols like firewalls
  • Encryption and multifactor authentication

Still, one factor that makes savings accounts safer than checking accounts is the lack of a debit card. The debit card that comes with a checking account may get stolen, providing the thief with unauthorized access to your money and allowing them to make fraudulent transactions.

Why Is a Savings Account Better Than a Checking Account for Saving Money?

Unlike checking accounts, savings accounts are designed for saving money and growing funds. Therefore, they offer higher interest rates than checking accounts that often pay low or no interest.

While checking accounts are meant to help you cover daily expenses, savings accounts offer more options to help you reach a distinct financial goal. For example, some savings accounts allow you to save money for a specific purpose like college, medical expenses, or retirement and earn interest on your contributions.

Savings vs. Checking Account—Which Is Better?

Whether you should choose a savings account or a checking account depends on your personal needs. 

If you’re looking for a way to save money for a certain financial goal, putting funds away in a savings account is the better option because it allows you to not only safely store them but also make a profit through accrued interest. However, if you need a safe place to hold your funds so you can make everyday purchases without carrying cash, a checking account is the way to go. 

Since these two accounts serve different purposes, you may also consider opening both. Banks often allow you to link your checking and savings accounts, making it easy to:

  • Transfer funds between the two accounts 
  • Avoid overdraft fees
  • Use an ATM to withdraw cash from your savings account

Still, before opening either account, make sure you consider the pros and cons of each type.

Checking Account Pros & Cons

Opening a checking account comes with the following benefits and drawbacks:

Checking Account ProsChecking Account Cons
• Debit cards allow for immediate withdrawals
• Direct deposits let you receive funds instantly
• Digital wallet compatibility lets you link your debit card to Apple Pay or similar digital payment options
• They typically allow you to write checks
• Automated payments are allowed, meaning you can set up auto-pay on your bills
• Easy money accessibility may lead you to spend more funds than you have in the account, resulting in account overdraft
• Many accounts require you to maintain a minimum account balance and impose fees if you don’t
• Some banks charge overdraft fees

Savings Account Pros & Cons

If you open a savings account, you may experience these advantages and disadvantages:

Savings Account ProsSavings Account Cons
• They provide a higher APY than checking accounts
• There are no checks or debit cards available, leading to less temptation to overspend
• They allow you to link multiple savings accounts together to avoid overdrafts
• Withdrawals usually have a monthly limit
• They are not suitable for daily spending due to the lack of a debit card
• You may have to meet a minimum deposit requirement when opening the account or pay fees if you don’t maintain a certain balance

Besides the already mentioned pros, one major advantage savings accounts have over checking accounts is that, in some cases, they help you build credit on top of saving money. 

Transferring your funds to a high-yield savings account will grow your wealth—especially if you store it for an extended period. This is why many people decide to keep their hard-earned cash in a savings account. Unfortunately, the fact that people have significant sums in savings accounts also makes them a target for scammers.

Traditional savings accounts only offer FDIC insurance, which many people perceive as a high level of security. While this insurance is a guarantee in case of bank failure, it offers no protection against financial fraud.

The one-of-a-kind savings account that prioritizes fraud protection is FortKnox. This high-yield savings account allows you to save, earn interest, and never lose money to scams.

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