Bottom line:
- Most people use a checking account for day-to-day expenses, while a savings account is a good place to set money aside and watch it grow over time.
- Both types of accounts can be managed using a mobile app; they allow you to get money from ATMs, and your money is protected through the federal government.
- The interest you can earn on a savings account is usually higher than you can earn with a checking account, but there are limits on how often you can take money out of ATMs.
- If you’re choosing a credit union, your savings account is how you first establish membership, it becomes your share in the credit union — because at a credit union, members are owners.
Checking and savings accounts serve different purposes. While checking is typically used for everyday spending like gas, groceries, and utility bills, a savings is a place to set money aside for your goals.
If one of your financial goals is to save for a home, car, or vacation, it can be helpful to split what you have into these different “buckets.” You could decide, say, that your paycheck goes directly into your checking account, where you’ll spend it on day-to-day expenses, while any money you don’t need right now can be deposited or moved into savings for those goals. The amount you put into each account is up to you and will depend on your income, expenses, and savings goals. Look for a financial institution that allows you to open savings accounts tied to a specific goal, for example, at CEFCU — My Use Accounts.
They do have some similarities, though.
- You can get cash from ATMs using a debit card tied to either type of account (though not all institutions offer a savings-only debit card)
- Both allow you to manage your money via your bank or credit union’s mobile banking app
- Your money is protected up to $250,000
- You can also open a joint savings or checking account with someone else and easily transfer money between the two accounts
Checking accounts vs. savings accounts
Both checking and savings accounts can pay interest, what’s called annual percentage yield (APY), but rates tend to be higher for savings. Since many people try to keep their savings for a “rainy day” or a long-term goal, it makes sense to use this type of account to store money and watch it grow until you need it or are ready to spend it.
As mentioned, you can take out money from an ATM using a debit card from either account, but if you only have a savings account, the number of withdrawals allowed each month may be more limited.
And if you decide to become a member of a credit union, you’ll need to open a savings account first; this establishes your membership, giving you access to all member benefits, including a checking account, as well as establishing you as an owner of the credit union.
Checking and savings accounts serve different purposes, and both can help you manage everyday spending while working toward your long-term financial goals.
Explore more about savings and checking accounts
Learn more about savings and checking accounts and explore these resources that help answer common questions:
►How do I use a checking account day to day?
►How is a debit card different from a credit card?
►How is my money protected when I use a debit card, and what should I watch out for?
►How do I choose the right checking account for me?
