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Banking Basics

Checking vs. Savings Account

What is a checking account? What is a savings account? Explore the pros and cons of each and learn everything you need to know to manage your money.

Jackie Lam • November 9, 2021

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. Checking vs. Savings FAQs

If you’re opening a bank account, you might be scratching your head wondering: What’s the difference between a checking and savings account? And do I need both? While these two types of accounts may be similar, they also have some key differences.

Let’s take a look at how these two types of bank accounts differ. There are pros and cons of each, so which is right for you? Maybe both? Read on to learn more. 

What’s a Checking Account?

Checking accounts are also known as “transaction accounts” because they’re designed for transactions: taking money out and putting money in. In other words, a checking account is where you keep your money for day-to-day spending.

Here’s what checking accounts are typically used for: 

Usually, you 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 are coming 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

Checking accounts aren’t really the best place to keep your money for the long term because they don’t always pay interest. If a checking account does pay interest, the APY (annual percentage yield) tends to be tiny. It can also be hard to distinguish what money you want to save and what you’re okay spending. 

In summary, the cons 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 stash money to save up for future goals. Your savings is less liquid, and it’s where you keep money for longer periods of time. You may even use your savings account as a rainy day fund or emergency fund. 

Savings Account Pros

Savings accounts are a safe way (FDIC-insured) to stash your money. They also help you stay accountable by keeping money separate that you’re not willing to spend. This is great when you’re saving up for a big purchase like a car, home, or vacation. 

Plus, you can typically 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

Whereas checking accounts offer unlimited transactions, savings accounts often have limits. However, the FDIC announced in April of 2020 that it would no longer require financial institutions to enforce the limit of 6 withdrawals per month.

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 0.06% APY, as of September 2021. 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

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 quick glance. Here’s a look at the main differences: 

Primary useSpending moneySaving money
InterestSometimes Yes
Withdrawal limitsNoYes
Minimum balanceVaries by bankVaries by bank
Debit card accessYesRarely
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 make sure 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 those ways is by charging fees. 

Common fees for checking accounts include:

  • ATM fees: Charges that occur when using an ATM
  • Overdraft fees: Charges that occur 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 of the possible fees to avoid extra strain on your budget. Explore options for spending and savings accounts where you don’t have to worry about hidden fees¹

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, 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 you’re opening an account online or at a brick-and-mortar location, you’ll need to supply personal information such as your name, address, and date of birth. You’ll also need to provide an ID number, like your Social Security Number. 

With Chime, opening a Savings Account is quick and easy. It’s free to sign up and takes less than 2 minutes!

Checking vs. Savings FAQs

Still wrapping your head around checking and savings accounts? Here are some more questions and answers that might help. 

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 be helpful for separating what you want to spend versus what you want to save. However, savings accounts often have higher interest rates so 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 larger amounts of money because there aren’t debit cards and checks linked to the account for easy access to funds. 

Banking services provided by The Bancorp Bank, N.A. or Stride Bank, N.A., Members FDIC. The Chime Visa® Debit Card is 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 cards are accepted. The Chime Visa® Credit Builder Card and the Chime Visa® Cash Rewards Card are issued by Stride Bank pursuant to a license from Visa U.S.A. Inc. and may be used everywhere Visa credit cards are accepted. Please see 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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1 Out-of-network ATM withdrawal fees apply except at MoneyPass ATMs in a 7-Eleven location or any Allpoint or Visa Plus Alliance ATM. Other fees such as third-party and cash deposit fees may apply.

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