Checking vs. Savings Accounts: Two Different Use Cases

Everyone needs at least one bank account, but sometimes you can benefit from multiple, including a checking and savings account. But how do you know which is right for you?

Each account has its purpose and when used right can help you manage your finances. Use them wrong though and you could cost yourself unnecessary money or not make as much money as you wanted in interest.

Checking vs. savings account

	Checking	Savings
Intended Purpose	Convenient, frequent access to your funds	To let money grow for financial goals
Interest	Little to none	Typically higher than a checking account
Fees	Service/maintenance fees, ATM fees, minimum balance fees, overdraft fees, and more	Excess transaction fees, service/maintenance fees, minimum balance fees, and more
ATM Access	Yes, but you may incur fees for using an ATM out of your institution’s network	Yes, but you may incur fees for using an ATM out of your institution’s network
Debit Card Available	Most accounts issue a debit card	Possible to request one, but not normally issued
Insured	Usually up to $250,000 by the FDIC or NCUA	Usually up to $250,000 by the FDIC or NCUA

What checking accounts are meant for

Paying bills and spending money

A checking account gives you easy access to your money. You can make deposits and withdrawals, use your debit card, and make electronic transfers, usually without any limits up to the amount you have in your account.

When you open a checking account online, most banks also offer features such as online bill pay or automatic savings so you don’t have to worry about forgetting to put money in your savings account.

Accessing cash quickly

Most checking accounts include a debit card that allows you access to your money via the ATM machine. You may even ask for cash back at the register by entering your PIN. If you use an in-network ATM, you typically won’t pay any fees to access your funds. However, if you use a non-network ATM, you may pay a fee to your bank and the host bank, so always read the fine print before using it.

Transferring funds easily

If you’re into technology, you may want to take advantage of digital wallets like Apple Pay or Google Pay. You may also send money to friends and family via Venmo or PayPal, each of which are easiest to use with a linked checking account. You simply enter how much you want to transfer and the money comes out instantly, no need to mess with cash.

The main purpose of a savings account

Working toward financial goals

If you’re saving your money for a special goal, such as a down payment on a house or a family vacation, it’s better off in a savings account. These accounts are meant to let money sit and earn interest; they are not for everyday spending.

Saving money for emergencies

Everyone should have three to six months of expenses set aside. If you have the money in your checking account, it’s easy to spend and not realize it. Putting money safely in a savings account, especially a high-yield savings account, ensures you’ll have the money when your car breaks down or you have a medical emergency.

Earning interest while you save

Most savings accounts pay interest, even if it’s 0.01% at a local brick-and-mortar bank, whereas many checking accounts do not pay interest. If you’re trying to make your money grow to save for a big financial goal, you want an account that pays as much interest as possible to help you reach those goals.

To truly grow your savings, consider opening a high-yield savings account. HYSAs pay higher interest rates than traditional savings accounts, helping your money grow faster. Just be sure to read the fine print and understand the account minimum balance requirements to earn the higher APY.

Why you need both

You might wonder if you need a checking or savings account, but the answer is you need both.

A checking account provides daily access to your funds for everyday spending and paying your bills. You can withdraw funds as needed by writing checks, visiting an ATM, or making electronic transfers. Most checking accounts don’t earn interest, because the funds are meant for everyday spending.

A savings account allows you to save for long-term goals, and usually pays interest on your balance. While the Federal rule that limits the number of withdrawals to six per month for savings no longer exists, some banks charge excessive withdrawal fees or will close your account if you withdraw too often.

Having both accounts gives you the best of both worlds. You can pay your bills and set money aside for goals, such as an emergency fund, down payment on a house, or a family vacation. You can earn interest on your savings, and know how much money you have available to safely spend without affecting your long-term goals.

Our recommended checking and savings accounts

Checking accounts		Saving accounts
Account name	APY and monthly maintenance fees	Account name	APY and monthly maintenance fees
Axos Rewards Checking	Up to 3.30%6 $0	Western Alliance Savings Account	Up to 4.35%7 $0
Ally Bank Interest Checking	Up to 0.25% (as of 10/28/24) $0	Ally Bank Online Savings	Up to 4.00% (as of 10/28/24) $0
CIT Bank eChecking	Up to 0.25% (as of 06/27/24) $0	CIT Bank Platinum Savings8	Up to 4.55% $0
U.S. Bank Smartly Checking	N/A $6.95, can be waived	CitiBank High Yield Savings	Up to 4.30% (as of November 21, 2024) $4.50 to $10, can be waived

FAQs

Bottom line

The good news is that you can have a checking and savings account. You can even have multiple savings or checking accounts.

I suggest having at least one checking account for your everyday spending and bills, and a savings account for your emergency fund and other goals. If you want to separate your savings, you could even open a couple of high-yield savings or money market accounts.

Just watch the fees and minimum balance requirements on each account to ensure you don’t pay unnecessary fees on checking accounts or reduce your savings.