Checking Account vs. Savings Account: Which Should You Pick?

Checking and savings accounts are the two most popular types of bank accounts, and they complement each other well. Many people have one of each, but if you only want one account to manage, it helps to understand the features of checking vs. savings accounts. 

Here's a closer look at how to compare checking accounts vs. savings accounts and how to know which is the right choice for your money.

The basics of checking accounts

The key difference between a checking vs. savings account is that checking accounts are primarily designed for spending while savings accounts are intended for saving. 

Checking accounts usually give you easy access to your funds, including multiple deposit and withdrawal options. But they won't earn you a lot of interest.

Features of checking accounts

Here are some of the most common features that distinguish checking vs. savings accounts.

Convenience: Banks and credit unions give you several ways to move your money in and out of your checking account, including:

• Debit cards: Debit cards are a stand-in for cash. You use them to make purchases at a store or withdraw cash at an ATM. There are usually daily limits on how much you can withdraw using a debit card. Some banks also have deposit-taking ATMs, which enable you to add cash to your account using your debit card.
• Checks: Checks are ideal for withdrawing large sums from your checking account. Many banks include a free book of checks when you open a checking account, but you usually have to pay for more.
• Online banking: Almost every checking account includes online and mobile banking access these days. This means you can view your balance, transfer funds between accounts, deposit checks remotely using the camera on your phone or tablet, and even pay bills directly from your account.

Few limitations: One of the biggest advantages of checking vs. savings accounts is that checking accounts enable you to withdraw funds as often as you'd like every month. In contrast, savings accounts normally have limitations (see below). 

FDIC insurance: All the checking accounts at top banks are insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000 per person per bank. That means if your bank goes under, the FDIC will reimburse your lost funds up to a maximum of $250,000.

Little to no interest: If you're comparing checking vs. savings accounts based on which will earn you more money, savings accounts are the clear winner. Checking accounts rarely enable customers to earn interest on their balance. When they do, the interest rate is usually far lower than with a savings account.

Fees: All bank accounts can charge fees, but you usually find more with checking vs. savings accounts because there's more you can do with checking accounts. Some of the most common checking account fees include:

• Monthly maintenance fee: This is the fee you pay to own your account. Some banks, including many online banks, don't charge a maintenance fee. Nearly all the banks that do enable you to waive it if you meet certain criteria. For example, you might need to maintain a certain balance, set up direct deposits into the account, or use your debit card a certain number of times each month.
• ATM fees: You don't have to pay to use your bank's own ATM network or any surcharge-free ATM networks it partners with. But if you use an out-of-network ATM, your bank could charge you $2 to $3 per withdrawal. The ATM owner may hit you with a fee as well.
• Minimum balance charge: Some checking accounts may charge you $10 to $12 if your balance drops below a certain amount, though there are plenty of accounts that don't charge this fee.
• Foreign transaction fee: If you use your debit card outside of the United States, you could incur a foreign transaction fee. This is often 3% of the purchase price. Some banks charge foreign transaction fees for banking with non-U.S. merchants, no matter where you are when you make the purchase.
• Overdraft fee: This comes into play if you attempt to withdraw more money from your checking account than you have. If you've opted into overdraft protection, you'll incur an overdraft fee. If not, your bank will just deny your withdrawal request. Overdraft fees are usually around $35 per transaction.

Types of checking accounts

When comparing checking vs. savings accounts, it helps to understand the types of account. Here are some of the most common types of checking accounts.

Basic checking: A basic checking account is a bare-bones account that typically has a low or no monthly fee and doesn't have balance requirements. But it might lack some common features, like check-writing capabilities.

Free checking: Free checking accounts don't charge monthly maintenance fees, but that doesn't mean they don't have fees at all.

Joint checking: A joint checking account is a checking account that two people co-own and may deposit money to or withdraw from as they see fit.

Business checking: Business checking accounts are checking accounts designed for managing company funds. Many business owners have a personal checking account for their own money and a business checking account for depositing customer payments and paying business bills.

Student (or minor) checking: These are typically free checking accounts targeted at minors or college-age adults. Fees are usually minimal and some minor checking accounts include parental access.

Online-only: Online checking accounts usually have no maintenance fees or minimum balance requirements and they're more likely to be interest-bearing. That's because online banks don't have a branch network to maintain, so they can pass their savings along to you.

High-yield checking: The main difference between interest (high-yield) checking vs. savings accounts is that interest checking accounts have more deposit and withdrawal options and lower APYs. You may have to meet certain requirements, like maintaining a certain balance or setting up direct deposits, to earn interest.

Rewards: Rewards checking accounts include debit cards that function like rewards credit cards. You earn cash back on your purchases, which ends up back in your bank account.

Second-chance: Banks can close your checking account if you rack up fees and leave them unpaid for too long. If you'd like to open a new checking account after this, you may need a second-chance checking account. These accounts tend to have more restrictions than a normal checking account.

Basics of savings accounts

One of the interesting things about checking vs. savings accounts is that one is strong where the other is weak. Savings accounts are popular because they enable you to earn higher APYs on your extra cash, especially if you go with a high-yield savings account. But you'll find fewer limitations on withdrawals with checking vs. savings accounts.

You're normally limited to six "convenient" withdrawals per month (per Regulation D). Convenient withdrawals are basically considered to be anything that doesn't require you to get in your car or pick up a phone to complete. So an online transfer is considered convenient while going to a branch to make a withdrawal is not.

The federal government has waived the monthly withdrawal limits due to the COVID-19 pandemic. So at present, depending on your account, you can withdraw money as often as you'd like. This probably won't last forever, though.

Features of savings accounts

Know these common features of savings accounts when comparing checking vs. savings accounts.

Higher interest rates:  When comparing checking vs. savings accounts, the APY isn't even close. Savings accounts have the clear edge. But rates can vary widely depending on the type of bank you choose and how the economy is doing. Brick-and-mortar savings accounts usually have APYs under 0.10% while it's possible to find rates around 2% with some online banks when times are good.

Low minimums: Some savings accounts may require you to deposit a certain amount of money to open the account or avoid monthly fees, but the requirements are usually a few hundred dollars or less. Some savings accounts don't have minimum deposits at all.

Ease and simplicity: Savings accounts are pretty easy to open and straightforward to use. 

Withdrawal and transfer limits: One reason to choose a checking vs. savings account is that checking accounts have no withdrawal restrictions while savings accounts limit you to six convenient withdrawals per month, as discussed above. 

Less access: If easy access to your funds is important to you, choose a checking vs. savings account. Checking accounts are more likely to have debit cards and check-writing capabilities while these are rare with savings accounts.

FDIC insured: Like checking accounts, savings accounts are also usually FDIC insured up to $250,000 per person per bank.

Types of savings accounts

Understand the different types of savings accounts so you can more easily compare checking vs. savings accounts to find the one you're most interested in.

High-yield savings: You typically see high-yield (or high-interest) savings accounts with online banks. These offer the most competitive interest rates, though rates will vary over time. These accounts may have stricter minimum balance requirements. This may make them difficult to access for some people with smaller balances.

Online-only savings: Online savings accounts are often high-yield savings accounts by definition. This is because operating exclusively online is more cost-effective for the bank and it shares its savings with you in the form of higher rates.

Specialty account types: Those with particular savings goals should give the edge to savings accounts when comparing checking vs. savings accounts. Here are a few special types of savings accounts you may be eligible for:

• College (aka 529 plans): College savings accounts are special types of accounts designed to help fund higher education. They offer special tax advantages to the holder, and anyone going to college or university at least half time is eligible for one of these accounts.
• Health savings accounts (HSAs): An HSA is a special type of savings account designed to help you set aside money for medical expenses. It's only available to those with high-deductible health insurance plans -- one with a deductible of $1,400 or more for an individual in 2020 or $2,800 or more for a family. Contributions to HSAs reduce your taxable income for the year.  And if you use the money for medical expenses, you won't owe taxes on it at all.

So which one is right for you?

It makes sense for most people to have both types of accounts rather than choosing between a checking vs. savings account. Use your checking account for your everyday expenses since it gives you easier access to your funds and put any extra cash into your savings account where it will earn more interest.

If you're determined to only have one, the decision of checking vs. savings account comes down to how you plan to use your money. If you're going to make frequent withdrawals, a checking account is your best option. You won't have to worry about extra fees for excess withdrawals and you'll have plenty of options for accessing your funds that you wouldn't have with a savings account.

On the other hand, if you rarely withdraw money, choosing a checking vs. savings account may be the wrong choice. You can earn a lot more in interest with a savings account, especially if you go with a high-yield savings account. Just stay mindful of how many withdrawals you make in a month so you don't accidentally incur fees.

Still have questions?

Here are some other questions we've answered:

• What is a savings account?
• What is a checking account?
• Where should you park your cash?
• How to open an online checking account