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Checking vs Savings: Choose the Best Account Option

In this article

  1. What’s a checking account?
  2. What’s a savings account?
  3. What is the difference between a checking and savings account?
  4. How to choose a checking and savings account
  5. How to open a checking or savings account with your bank
  6. Choosing between a checking vs. savings account
  7. Checking vs. savings account FAQs

What is the difference between a savings and checking account? While a checking account is useful for daily transactions a savings account can help you reach your long term financial goals.

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Jackie Lam • May 30, 2023

If you’re opening a bank account, you might be wondering: What’s the difference between a checking vs. savings account? And do I need both?

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 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
  • To send checks

Usually, you will have a debit card associated with your checking account. So 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 pros, 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 to use for everyday spending
  • Ideal for paying monthly bills

Checking account cons

Unlike a savings account, many checking accounts don’t pay interest. For this reason, a checking account may not be the best place to store your long-term savings if you want to maximize the amount you can earn. While there are some checking accounts that do pay interest, the APY (annual percentage yield) tends to be small. As of April 2023, FICO reports the current national average as 0.06%.1

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 okay spending.

In summary, the cons are:

  • Typically lower interest rates than savings accounts
  • Not ideal for long-term savings
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What’s a savings account?

A savings account is where you keep money for future goals. Your savings are less liquid, and it’s where you keep money for more extended periods of timeYou may even 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 is like a traditional account but offers a higher interest rate which can help you to 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 keeping money separate that you’re not willing to spend. This is 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:

  • Typically has a higher interest rate than a checking account
  • Allows you to build long-term savings
  • May come with extra benefits like automatic savings
  • Keeps money separate that you’re not willing to spend

Savings account cons

While many checking accounts offer unlimited transactions, savings accounts often have limits. 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 savings accounts currently stands at 0.39% APY as of April 2023.1 However, other savings tools may come with penalties.

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:

CHECKINGSAVINGS
Primary useSpending moneySaving money
InterestSometimesYes
Withdrawal limitsNoYes
Minimum balanceVaries by bankVaries by bank
Debit card accessYesRarely
ChecksYesRarely
FeesYes (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 a number of 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 feesCharges 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 feesCharges 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.

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: Also, 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’ll may also need to provide an ID number, like your Social Security Number.

Depending on your bank, you might need to fund your account before it is activated. Some accounts allow you to fund your account after it is open. 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.

If you are considering opening a checking or savings account through an online-only option, check out the pros and cons of online banking.

Checking vs. savings account FAQs

If you’re still trying to understand the difference between a savings and checking account, here are some more questions and answers to help clarify.

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?

Having money in both a checking and savings account can help separate what you want to spend from what you want to save. However, savings accounts often have higher interest rates so that you can put more cash back in your pocket.

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?

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.

Chime® is a financial technology company, not a bank. Banking services are provided by The Bancorp Bank, N.A. or Stride Bank, N.A., Members FDIC. The Chime Visa® Debit Card and the Chime Credit Builder Visa® Credit Card are issued by The Bancorp Bank, N.A. or Stride Bank pursuant to a license from Visa U.S.A. Inc. and may be used everywhere Visa debit and credit cards are accepted. Please see the back of your Card for its issuing bank.

While Chime doesn’t issue personal checkbooks to write checks, Chime Checkbook gives you the freedom to send checks to anyone, anytime, from anywhere. See your issuing bank’s Deposit Account Agreement for full Chime Checkbook details.

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‡ SpotMe® for Credit Builder is an optional, no interest/no fee overdraft line of credit tied to the Secured Deposit Account. SpotMe on Debit is an optional, no fee service attached to your Chime Checking Account (individually or collectively, “SpotMe”). Eligibility for SpotMe requires $200 or more in qualifying direct deposits to your Chime Checking Account each month.

Opinions, advice, services, or other information or content expressed or contributed here by customers, users, or others, are those of the respective author(s) or contributor(s) and do not necessarily state or reflect those of The Bancorp Bank, N.A. and Stride Bank, N.A. (“Banks”). Banks are not responsible for the accuracy of any content provided by author(s) or contributor(s).

1 Information from Federal Deposit Insurance Corporation (FDIC) "National Rates and Rate Caps" as of May 7, 2023: https://www.fdic.gov/resources/bankers/national-rates/

2 Information from the Federal Deposit Insurance Corporation "Options For Deposit Insurance Reform" as of May 17, 2023: https://www.fdic.gov/analysis/options-deposit-insurance-reforms/report/options-deposit-insurance-reform-full.pdf

*Chime Checking Account is required to be eligible for a Savings Account.

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