Checking account vs. savings account

If you’re looking to open a new bank account, you may be wondering whether a checking account or savings account is right for you. After all, they both have their perks.

Luckily, you typically can open both a checking account and a savings account. And there’s a good chance that you’ll want to do just that. Here’s what you need to know. 

Key takeaways

  • A checking account can be used to manage money for daily spending and expenses through the use of a debit card, checks and automatic payments.
  • A savings account can be used for longer-term savings, such as an emergency fund.
  • Your money is protected from fraud and theft in both checking and savings accounts.
  • Having both a checking account and a savings account can help you capitalize on the benefits of each.

What is a checking account?

A checking account is your go-to account for everyday withdrawals, purchases and expenses. You can access your money when you need it in a variety of ways.

Checking accounts are offered by nearly all banks, credit unions and other financial institutions. 

Benefits of a checking account

A checking account can make managing your money a little easier. Here are just some of the benefits a checking account can offer:

  • Online banking: When you open a checking account, you typically get access to that financial institution’s online banking services, which allows you to easily manage your money.
  • Debit cards: Your debit card is linked to your checking account and allows you to use the money in your account for purchases. Debit cards can also be used at ATMs for cash withdrawals and other transactions.
  • Checks: You can order paper checks for most checking accounts. Checks may not be as common as they once were, but they can still be useful—and even required—at times. You may find yourself taking out your checkbook to pay rent, for example. Or you may want to write a check when you need a little more security than cash offers, such as mailing a monetary gift.
  • Direct deposits: You can get your paychecks sent directly to your checking account without the hassle of having to deposit them. You might also hear or see this called an ACH deposit
  • Automatic payments: You can set up automatic payments to help you stay on top of your bills.

Things to consider with a checking account

Here are a few things to keep in mind when considering a checking account:

  • Low interest: Checking accounts typically have low interest rates—you might hear this referred to as annual percentage yield or APY. In other words, you typically won’t make much money from your checking account.
  • Fees: Some banks or credit unions charge a fee for opening and maintaining an account. But maintenance fees are often waived if you meet a minimum balance requirement or have a consistent direct deposit.
  • Minimum balance requirements: Some checking accounts may require you to keep a minimum balance or deposit money into your account on a regular basis.

What is a savings account?

A savings account is exactly what it sounds like: It’s an account for saving money instead of spending it.

Savings accounts can help you build an emergency fund or put money aside for goals like saving for a vacation or big purchases like a car or mortgage down payment. Like checking accounts, savings accounts are also offered by banks, credit unions and other financial institutions.

Benefits of a savings account

Here are some of the benefits you might enjoy with a savings account:

  • Higher APY than a checking account: Savings accounts generally offer higher interest rates than checking accounts. That means that banks pay interest into your account, usually monthly. You’ll continue to earn interest on any interest-bearing savings account for as long as the money stays in the account.
  • Accessibility: Even though savings accounts are designed for saving and not spending, the money in your savings account is still much more accessible than, say, the money in your retirement fund. Like a checking account, opening a savings account usually gives you access to that financial institution’s online banking services so you can easily manage your account.
  • Overdraft protection: If you have both a checking account and a savings account with the same bank or credit union, you can often link your savings account to your debit card as a form of overdraft protection. Then, if you spend more money than you have in your checking account, money from your savings account can automatically be transferred to cover the difference.

Things to consider with a savings account

Here are a few things to keep in mind when it comes to a savings account: 

  • Less accessibility than a checking account: While savings accounts are relatively accessible, they’re less accessible than checking accounts. For example, you can’t use your debit card or checkbook to spend the money that’s in your savings account.
  • Withdrawal limits: Savings accounts are often subject to a monthly withdrawal limit—a limit on the number of times you can withdraw money. This limit was originally due to a federal reserve law. And although the law no longer exists, many financial institutions still charge a fee for going over this limit—usually six withdrawals per month.

The safety of a checking account vs. a savings account

If you’re wondering how safe your money is in a checking account or a savings account, you can rest easy.

As long as your bank or credit union is a member of the Federal Deposit Insurance Corporation (FDIC) or National Credit Union Association (NCUA), your deposits are insured.

As the FDIC explains, “Deposit insurance is one of the significant benefits of having an account at an FDIC-insured bank—it’s how the FDIC protects your money in the unlikely event of a bank failure. The standard insurance amount is $250,000 per depositor, per insured bank, for each account ownership category. And you don’t have to purchase deposit insurance. If you open a deposit account in an FDIC-insured bank, you are automatically covered.”

And the NCUA says, “Federally insured credit unions offer a safe place for credit union members to save money. All deposits at federally insured credit unions are protected by the National Credit Union Share Insurance Fund, with deposits insured up to at least $250,000 per individual depositor. Credit union members have never lost a penny of insured savings at a federally insured credit union.”

Keep in mind that non-deposit investment accounts—like mutual funds, stocks and bonds—are not insured.

It’s also worth noting that liability for a lost or stolen debit card varies, depending on how quickly you report it. But some banks—including Capital One—offer $0 liability for unauthorized charges. If your card is lost or stolen, you will not be responsible for charges you did not authorize.*

Checking vs. savings accounts: Which is better?

Because checking and savings accounts both have their own benefits, which is best for you may depend on your own financial needs. Do you need to access your money for daily expenses? Or are you looking to stash away some cash—and earn some interest on it—in case of an emergency? For many people, the answer is both.

In other words, you might want to think of it less as “checking versus saving accounts.” While having just one of these accounts might be plenty helpful, you may find that you can benefit from having both a checking account and a savings account.

Check out this handy comparison of checking and savings accounts:

  Checking account Savings account
Purpose Everyday purchases Short- and long-term saving
Transactions Unlimited Can be subject to withdrawal limits
Accessibility Online banking, debit card, checks Online banking
Interest earnings Generally low Generally higher than a checking account
FDIC- or NCUA-insured Yes, if the bank or credit union is a member Yes, if the bank or credit union is a member


Checking vs. savings accounts in a nutshell

To get more out of your money, you could consider opening both a checking account and a savings account. Checking and savings accounts each have their own unique perks—and there are benefits to having both.

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