Have you ever wondered what's the difference between checking account and savings account? Do you know which one do you need? Before you visit the bank to open an account, check these tips to know which type suits you better.
How many times have you heard the terms checking and savings account? Probably thousands of times! But, do you really know what's the difference between them?
Before you visit your bank and open an account, you should learn what each account offers and which one suits your needs better!
Although they seem similar, there are key differences and you can check them out in this guide.
What's a checking account?
This kind of account can be also named "transaction account" as they solely allow you to withdraw and deposit money in it. Here's where you want to put your every day spending money in!
In detail, you can:
- Receive or transfer money via payment platforms.
- Deposit paychecks.
- Send checks.
- Set up automatic payments.
Also, you should know that debit cards are linked to this type of accounts.
Regarding fees, with checking accounts you will face ATM fees (when you take money out of an ATM that's outside your bank's network), overdraft fees (applied when you don't have enough money for a transaction), monthly fee (charged when you don't keep a minimum amount of money in your account), foreign transaction fees and card replacement fees.
The benefits of having a checking account are that you can make unlimited withdrawals and deposits. Besides, you can use your funds to pay your bills.
On the other hand, the downside of checking accounts is that they don't usually pay interest, so they probably aren't the best place to keep your money for the long term.
What's a savings account?
This kind of account is the one you choose to save your money for the future. If checking accounts are used to frequent money movements, savings accounts are the best place to put your money for long-term periods.
Regarding fees, you will face monthly maintenance fees, overdraft fees and minimum balances.
The benefits of a savings account are that they grant a safe place to stash your money. If you open a savings account, you will use it to deposit the money you don't want to spend in a short period.
Moreover, you can earn some interest in this type of account (the average interest rate is 0.09%).
The downside of savings accounts is that they have a limited number of transactions you can make. The Federal Reserve's regulation establishes that you can make up to six withdrawals or transfers in your savings account per month.