What is the difference between a savings and a checking account? And is it better to have both, or prioritize one over the other? While a checking account is useful for daily transactions, a savings account can help you reach your long-term financial goals.
Each type of account has pros and cons, so which one is right for you? Let’s examine the similarities and differences between a savings vs. checking account.
What’s a checking account?
A checking account is where you keep your money for day-to-day spending. You can and should use a checking account to pay bills or buy groceries.
Checking accounts can also be used to:
- Receive or send cash through a payment platform
- Deposit your paychecks
- Set up automatic payments for your bills
- Send checks
Checking accounts usually come with a debit card associated with the account to use for daily spending. This means that when you swipe your card to make a purchase or use an ATM, the funds come from your checking account.
Checking account pros
Checking accounts have lots of advantages, like allowing you to make frequent deposits and withdrawals (money in a checking account is very liquid). This also comes in handy when paying regular bills.
In summary, the pros are:
- No withdrawal limits
- Easy access for everyday spending
- Ideal for paying monthly bills
- Easily receive direct deposits
- Simple expense tracking
Checking account cons
Unlike a savings account, many checking accounts don’t pay interest. For this reason, a checking account isn’t the best place to store your long-term savings if you want to maximize the amount you can earn.
Some checking accounts do pay interest, but the APY (annual percentage yield) tends to be very small. As of April 2023, FICO reports the current national average APY on checking accounts as 0.06%.¹To put this number into perspective, if you kept one thousand dollars in a checking account with a 0.06% APY, you would accrue sixty cents of interest in a year.
Not only does your money not accrue efficiently, using a checking account to store your long-term savings can also make it hard to distinguish between what money you want to save and what money you’re comfortable spending.
In summary, the cons of checking accounts are:
- Typically lower interest rates than savings accounts
- Not ideal for long-term savings
What’s a savings account?
A savings account is where you keep money for future goals. Your savings are less liquid, and money usually stays in a savings account for more extended periods of time. You can also use your savings account as a rainy day or emergency fund.
There are different types of savings accounts, including traditional savings and high-yield savings accounts (HYSA). An HYSA functions similarly to a traditional savings account but offers a higher interest rate, helping you grow your savings faster.
Savings account pros
Savings accounts with FDIC insurance provide a safe place to save your money. They also help you stay accountable by storing the money you’re not willing to spend separately. This is especially useful when saving up for a big purchase like a car, home, or vacation.
Plus, you can earn some interest with savings accounts (more than you would in an interest-earning checking account).
In summary, the pros are:
- A higher interest rate than a checking account
- Allows you to build long-term savings
- May come with extra benefits like automatic savings
- Separates money storage so you don’t spend it
Savings account cons
While many checking accounts offer unlimited transactions, savings accounts often have limits, meaning you have a limited amount of withdrawals you can make. However, the FDIC announced in April 2020 that it would no longer require financial institutions to enforce the limit of six monthly withdrawals.²
You also typically won’t earn as much in interest as you would using other investment or savings tools, such as a 401(k), IRA, certificate of deposit (CD), or money market account. According to the FDIC, the average interest rate for all savings accounts currently stands at 0.41% APY as of February 2025.¹ For reference, a savings account holding $1000 with this APY would accrue $3.90 after a year.
In summary, the cons are:
- Monthly withdrawal limits often apply
- Investment accounts, money market accounts, and CDs usually offer higher interest rates
- Not ideal for everyday spending
Ready to put your savings to work? Open a Chime high-yield savings account* to watch your money grow.
What is the difference between a checking and savings account?
Now that you know the basic pros and cons of checking and savings accounts, let’s compare them at a glance. Here’s a look at the main differences between checking and savings accounts:
| CHECKING | SAVINGS | |
|---|---|---|
| Primary use | Spending money | Saving money |
| Interest | Sometimes | Yes |
| Withdrawal limits | No | Sometimes |
| Minimum balance | Varies by bank | Varies by bank |
| Debit card access | Yes | Rarely |
| Checks | Yes | Rarely |
| Fees | Yes (see below) | Yes (see below) |
How to choose a checking and savings account
When determining the best accounts for you, two main things to consider are bank fees and convenience. This helps ensure you’re keeping as much of your hard-earned money as possible while having access to your funds without extra hassle.
1. Bank fees
Banks and other financial companies make their money in several ways. One of these ways is by charging fees.
Common fees for checking accounts include:
- ATM fees: Charges that occur when using an ATM.
- Overdraft fees: Charges that happen when you spend more than what’s available in your account.
- Monthly fees: Charges for not maintaining a minimum balance, etc.
- Foreign transaction fees: Charges when you use your debit card outside of your country.
- Card replacement fees: Charge for asking for a replacement debit card.
Common fees for savings accounts include:
Monthly maintenance fees: Charges to maintain your account each month.
Overdraft fees: Charges if you withdraw more money than what’s in your savings.
Minimum balance fees: Charges for not maintaining a minimum balance requirement.
Depending on your account, there may be ways to avoid these fees. However, it’s best to understand all the possible fees to prevent extra strain on your budget. You can explore options for spending and savings accounts without these types of fees, like with Chime.
2. Convenience
The next factor to consider when choosing spending and savings accounts is convenience.
ATM access: For starters, check the bank’s network of ATMs and see where you can withdraw money from a fee-free ATM.
Customer service: Do some poking around to see how their customer service fares. Is it easy to get a hold of someone? Are they helpful once you get someone on the line or via chat?
Features: Automatic savings features, a great mobile banking app, and the ability to send money to family and friends — these are all great features you should benefit from! Make sure you’re not missing out.
How to open a checking or savings account with your bank
Whether opening an account online or at a brick-and-mortar location, you must supply personal information such as your name, address, and date of birth. You may also need to provide an ID number, like your Social Security Number.
Some accounts require you to deposit a certain amount of funds, or a minumum deposit, to activate your account. Other accounts allow you to fund your account after you’ve opened it.
You can fund your account in several ways, including depositing cash, using a pre-paid card, or sending an e-transfer from another account.
Choosing between a checking vs. savings account
There are significant differences between checking and savings accounts. A checking account is designed for everyday transactions. You might use it to buy groceries, pay bills, and withdraw money from the ATM. A savings account offers a place to stash money to save up for future goals. Generally, it’s good to have one of each to handle all of your banking needs.
If you’re considering opening a checking or savings account through an online-only option, check out the pros and cons of online banking.
Frequently Asked Questions
Is a debit card checking or savings?
Debit cards are associated with checking accounts. Checking accounts also typically have checks. ATM cards and checks are not common for savings accounts.
Is it better to keep money in a checking account or savings account?
Storing your money in both a checking and savings account helps separate what you want to spend from what you want to save. However, savings accounts often have higher interest rates ultimately making it more advantageous to store your money so you can accrue interest.
Which is safer, a checking or savings account?
Both checking and savings accounts are FDIC-insured. However, a savings account can be a safer way to stash more significant amounts of money because there aren’t debit cards and checks linked to the account for easy access to funds.
Do checking accounts earn interest?
Most checking accounts don’t earn interest, but some do. Interest-checking accounts allow you to earn interest on your balance but typically don’t earn as much as a savings account.
Which type of bank account is best for everyday transactions?
Can I overdraw my savings account?
Generally, you can’t overdraw a savings account because most banks won’t allow withdrawals if you don’t have enough funds. However, you might incur fees if you attempt to withdraw beyond your balance or exceed your withdrawal limits. Checking accounts, on the other hand, may allow or protect you from overdrafts if you have that feature set up.
How much cash is too much to have in savings?
There technically is no such thing as too much cash in a savings account. If you’re saving for an emergency fund, hold enough cash to cover three to six months worth of expenses. If you plan to store more than that, you’ll be better off storing your cash in a high-yield savings account (HYSA). HYSAs are similar to a regular savings account except you get the added bonus of a higher interest rate.
How much money should I keep in my checking account?
The amount of money to keep in your checking account depends on your spending habits, monthly expenses, and financial goals. Generally, a good rule of thumb is to keep one to two months worth of expenses in your checking account. Expenses to keep in mind are things like rent, utilities, insurance, groceries, and credit card payments.
Which account should I use for an emergency fund?
A savings account is generally the best place for an emergency fund, as it offers a safe place for storing money that you won’t need immediately but can access if something unexpected happens. It also earns interest, helping your emergency fund grow over time.
Which is safer, a checking or savings account?
Both checking and savings accounts are FDIC-insured. However, a savings account can be a safer way to stash more significant amounts of money because there aren’t debit cards and checks linked to the account for easy access to funds.
Which type of bank account is best for everyday transactions?
A checking account is better than a savings account for everyday transactions. Checking accounts typically come with a debit card and checks to help make day-to-day transactions more convenient, while most savings accounts do not. A savings account is meant to store and grow your money for the longer term.
A checking account is better than a savings account for everyday transactions. Checking accounts typically come with a debit card and checks to help make day-to-day transactions more convenient, while most savings accounts do not. A savings account is meant to store and grow your money for the longer term.