What is the difference between a savings account and a checking account?
It’s good to understand the difference between savings and checking accounts. Knowing their similarities and difference
can help you determine the best account for you and your money needs.
Historically savings and checking accounts were quite different. Savings accounts were considered “deposit” accounts
and earned interest that was paid daily or monthly. Checking accounts were used to pay bills or make purchases.
Today, savings and checking accounts are similar in many respects. The main differences are that savings accounts limit
the number of monthly transactions and always earn interest.
Here’s a listing of the main features of savings accounts:
Primary purpose is to save money (for emergency, for future purchases, or to invest).
Number of withdrawals per month is limited (6 or less).
Typically pays a higher interest rate than an interest-bearing checking account.
May require a minimum balance to avoid fees.
May charge fees for too many withdrawals.
The main features of a checking account include:
Primary purpose is for everyday money transactions such as paying bills and making purchases.
Few or no restrictions on the number of withdrawals or checks per month (some checking accounts offer a limited
number of “free” checks per month and then charge a fee if more checks are written).
May pay interest, with some accounts paying higher interest rates as your balance increases.
Usually charges a monthly maintenance fee (which may be waived under certain circumstances, such as
maintaining a minimum daily or monthly balance, or if the account is linked to a savings account in the same
institution). Check with your financial institution to learn if you can qualify for a “no fee” checking account. Many
offer no fee accounts for students.
