Checking and savings accounts, the most common financial products offered by banks and credit unions, have both similarities and differences. Each allows you to deposit funds and provides government-backed insurance that guarantees the safety of your balance (currently up to $250,000). But the two types of accounts also differ in terms of their intended use, with checking accounts being designed for everyday banking and regular access to cash, while savings accounts are meant primarily for long-term money storage.
Whether you need one or both types of accounts, understanding the features and functions of each will help you determine what best fits your needs.
Are you ready to open an account? WalletHub can help with comparison tools for checking accounts and savings accounts
Table of Contents
The Quick RundownFees and Other CostsAccessibilityUsing Checking and Savings Accounts TogetherTips
The Quick Rundown
Checking
Checking accounts are designed for regular spending and immediate needs such as paying bills, covering everyday expenses (e.g., buying gas or groceries), depositing money (including direct deposit of your paycheck or other payments you receive) as well as transferring funds to or from other accounts.
Although you can use your checking account as a reserve account for your cash, much like a savings account, it may not be the best option for that purpose. Most checking accounts do not earn interest, and even those that do typically earn less than a savings account at the same financial institution. Perhaps more importantly, many people find it hard to save money in an account that they also use for their regular spending.
Savings
Quite the opposite of checking, savings accounts are tailored for minimal access. Savings accounts are designed for earning interest on your deposits, deferring your spending and earmarking the funds for specific purposes (e.g., emergencies or big purchases, such as a new car).
A savings account also serves a different purpose than alternative savings vehicles such as certificates of deposit (CDs) and investments. While CDs may earn higher rates of interest, they lack the flexibility of a savings account because funds cannot be withdrawn without penalty until the end of the CD’s term. Likewise, investments may earn greater returns, but — unlike a savings account — they can also lose value.
Fees and Other Costs
In general, savings accounts will charge fewer fees, if any, than checking accounts, depending on your financial institution and the specific type of account you open. Many of the fees that are attached to checking accounts often don’t accompany savings accounts because of the lack of regular-spending features. The most common fee associated with both types is the monthly service charge, which can generally be waived if you meet a minimum daily balance or if you sign up for direct deposit. Some financial institutions charge a monthly fee regardless of your account balance or activity.
In the tables below, we’ve listed typical fees and costs associated with each type of account, as well as other, less familiar fees that you may encounter. You can also refer to WalletHub’s quarterly Banking Landscape Report for a detailed analysis of the most common fees and rates associated with accounts at various types of financial institutions across the United States. Keep that you can save on fees by choosing an online bank or a credit union for checking and savings accounts.
| Most Common Fees & Costs | |
|---|---|
| Checking | Savings |
| Minimum Balance Requirement | Minimum Balance Requirement |
| Minimum Deposit to Open | Minimum Deposit to Open |
| Monthly Fee | Monthly Fee |
| Non-Network ATM Fee | Non-Network ATM Fee |
| Overdraft Fee | Excessive Withdrawal Fee (if you exceed monthly allowable withdrawal/transfer limit) |
| Nonsufficient Funds (NSF) Fee | - |
| Paper Statement Fee | - |
| Online Bill Pay Fee | - |
| Other Possible Fees & Costs | |
|---|---|
| Checking | Savings |
| Wire Transfer Fee (for incoming and/or outgoing wires) | Wire Transfer Fee (for incoming and/or outgoing wires) |
| Balance Inquiry Fee | Balance Inquiry Fee |
| Debit/ATM Card Replacement Fee | ATM Card Replacement Fee |
| Non-Bank Teller Withdrawal Fee | Non-Bank Teller Withdrawal Fee |
| Check Image Service Fee | Annual Fee |
| Online Transfer Fee | Online Transfer Fee |
| Fee for Statements with Check and/or Deposit Slip Copies | Fee for Statements Deposit Slip Copies |
| Returned Item Fee | Returned Item Fee |
| Check Image Service Fee | Annual Fee |
| Online Transfer Fee | Online Transfer Fee |
| Fee for Statements with Check and/or Deposit Slip Copies | Fee for Statements Deposit Slip Copies |
| Returned Item Fee | Returned Item Fee |
| Check Image Service Fee | Annual Fee |
| Online Transfer Fee | Online Transfer Fee |
| Fee for Statements with Check and/or Deposit Slip Copies | Fee for Statements Deposit Slip Copies |
| Returned Item Fee | Returned Item Fee |
| International Transaction Fee | International Transaction Fee |
| Per-Item Fee (if you exceed allowable check-writing limit) | - |
| Overdraft Protection Transfer Fee | - |
| Extended Overdrawn Balance Fee (if you have overdraft coverage and your balance remains negative for more than the number of allowable days) | - |
| Stop Payment Fee | - |
| Check Printing Fee | - |
Accessibility
Checking
Designed with ready access to your funds in mind, checking accounts provide many ways to spend and withdraw money in your account. In addition to a checkbook, most checking accounts automatically come with a debit card that doubles as an ATM card. You will likely also have access to online banking and a bill pay service.
Certain types of checking accounts may limit the number of checks you can write per month before you are assessed a fee; however, there is typically a way you can withdraw funds without penalty from a checking account when needed.
Savings
For many consumers, the limited functionality of a savings account and limited accessibility of funds helps them to resist the temptation of spending extra cash.
When you do want to make a withdrawal, you can usually do so through an ATM or in person at your bank branch. Another option would be to electronically transfer funds from your savings to checking.
But there are some restrictions on withdrawals. A federal law known as “Regulation D” requires banks to limit customers to six “convenient” savings account withdrawals and transfers per month, such those made online, by telephone, or by automatic transfer. Should you exceed this limit, you risk having your transactions declined or even being charged an “excess activity” fee. If you repeatedly exceed the limit, your account may be converted to a different type (e.g., checking) or closed entirely. Withdrawals in person and by ATM are not limited.
Of course, since the purpose of a savings account is to accumulate funds, there is no such restriction on deposits or incoming transfers.
Using Checking and Savings Accounts Together
Although checking and savings accounts are used for different purposes and offer contrasting features, they often work well in combination, especially when budgeting. For this reason, many people will open both a checking and a savings account. Here are a couple of illustrations of how the two accounts can optimize or enhance the features of the other:
- Earn More Interest: While interest rates on checking and savings accounts are both incredibly low these days, savings accounts generally earn higher rates of interest. In fact, many checking accounts do not earn any interest at all. If you’re maintaining a high balance in your checking account and the money is sitting idle for long periods, your most logical option is to move the extra cash to a savings account. Over time, that money will grow. Look into savings accounts at online-only banks, which generally provide the highest interest rates, according to WalletHub’s Banking Landscape study.
- Make It Easier to Save: Splitting your funds between checking and savings can help you save more, since your savings balance is “out of sight and out of mind.” If you keep only what you need on a day-to-day basis in your checking account and save the rest in a separate account, you may be less tempted to spend these funds.
- Protect Yourself from Costly Overdraft Fees: Every now and then, you might accidentally overdraw the funds in your checking account. In order to avoid costly overdraft or nonsufficient funds fees, you can elect to use your savings account for overdraft protection. In the event of a shortfall in your checking account, funds will automatically be pulled from a linked savings account to cover the amount by which you exceeded your balance.
You may incur a small transfer fee when your overdraft protection is. However, this charge is much less than the overdraft penalty fee you would otherwise incur (currently averaging $34 per transaction, according to the Consumer Financial Protection Bureau) — not to mention the embarrassment and hassle of a bounced check.
Keep in mind that transfers from savings to cover a shortfall in your checking account are subject to the Regulation D limit of six convenient transfers per month.
Tips
- Begin with the End in Mind: Be practical when shopping for a checking account. Think of your needs and previous usage habits. For instance, do you need paper checks or hard-copy statements? Do you need access to a local branch? How often do you need to withdraw cash? The answers to these questions will help you determine which fee structure might be best for you. Use WalletHub’s quick and easy comparison tools for Checking account and Savings account to help you find the best deals.
- Comparison Shop: Don’t open your account at a bank or credit union solely based on its name. Institutions offer different services, some of which may not suit your needs. The best approach to finding the right account is to compare offers and services from several banks and credit unions of different sizes. Compare banks and credit unions on WalletHub to find information, ratings, and reviews for thousands of institutions across the United States.
- Read the Fine Print: Once you've winnowed your account choices to your top contenders, read through each account agreement thoroughly to avoid surprises after you’ve opened an account. This task might sound daunting and time-consuming, but the payoff can be worth it in the end if you uncover fees, terms and conditions that you would only discover through your own research.
- Start Slowly: After opening a new account, hold off on setting up automatic withdrawal or recurring online bill-pay of your regular bills until you’re sure the institution and account are right for your needs. It can be hard to switch financial institutions once you have payments being regularly pulled from an account.
- Consider a Prepaid Card: If you need an account that serves the same functionality of a checking account — deposit money, pay bills online, purchase with plastic, and withdraw cash at ATMs — but you either can’t or don’t want to open one, a prepaid card is your next best option. Prepaid cards allow you to do everything you can with a checking account minus access to a physical checkbook. Find the best offers on prepaid cards through WalletHub’s prepaid card comparison tool.
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