When managing your money, one of the most important things you can do is make sure you understand how different accounts work. But when it comes to checking vs savings account, what’s the difference? In this article, you’ll go over some of the key factors that make them unique and explain why they’re both so important in today’s financial world.
The major differences between checking and savings accounts are accessibility and the amount of interest you can earn.
Checking accounts are more accessible because they have low or no minimum balance requirements, whereas savings accounts require a fixed amount to open one. Some checking accounts offer free ATM withdrawals, while others charge for each transaction. Since savings accounts have higher minimum balances than checking accounts, they also tend to be less convenient to use at ATMs.
Minimum Balance Requirements
A checking account requires a minimum balance to keep your account open. This is because banks charge you fees based on the number of monthly transactions you make and how much money is in your account. You may only realize what these monthly transaction fees are if you look at the fine print, but they can add up quickly if you are paying attention! According to Lantern by SoFi experts, “Checking accounts is a safe place to put your money.”
Savings accounts do not have a minimum balance requirement for each month or year, so there’s no cap on how much money can be kept in this type of account.
The interest rate you receive on your account depends on your account type. Checking accounts generally offer a lower interest rate than savings accounts, but this is only sometimes the case. For example, online savings accounts often have higher rates than traditional brick-and-mortar banks, while money market accounts usually offer an even more competitive rate (though these are typically limited to larger balances).
While a savings account and a checking account have similar functions in that they’re both deposit accounts, there are key differences between them. One of those differences is the fees associated with each.
A checking account has more limitations than a savings account, but using one won’t cost as much. The most common fee associated with checking accounts is probably the monthly maintenance fee.
Sometimes this is waived if customers keep a minimum balance in their account or meet certain other requirements (e.g., direct deposits). Other banks charge for overdrafts—these are especially common for low-balance accounts and can be avoided by linking your checking account to another bank or credit card for automatic transfers when needed; some banks offer daily transfers instead of monthly ones at no cost whatsoever!
There are many differences between checking and savings accounts, but the most important thing to remember is that they both serve different purposes. A checking account gives you access to your money whenever you need it while offering protection against overdrafts. A savings account gives you more interest over time and lets you set aside money for specific goals like emergencies or retirement. The choice is up to you!