Checking accounts are designed for everyday expenses while savings accounts can be a place to store and grow your money. Let’s look at what both types of bank accounts offer.
What is a checking account?
A checking account is a bank account where you can access your funds for everyday expenses. With a checking account, you can manage daily transactions like rent and utility bill payments. You can typically make purchases with the money in your checking account using your debit card and by writing checks. It can also be a place to deposit checks.
Pros and cons
With checking accounts, funds are typically available for withdrawals and transfers. They can be a convenient place to deposit your checks and handle daily, weekly and monthly expenses. Some checking accounts allow for unlimited transactions without fees. Some accounts also have no monthly maintenance fees, though it depends on your bank and which account type you have.
Keep in mind that checking accounts typically don’t earn interest, so they might not be the best place to grow your savings.
What is a savings account?
A savings account is a bank account that lets you earn some interest on your money. The interest rate is usually variable. Certain types of savings accounts, such as high-yield savings accounts, may offer higher rates than traditional savings accounts. Savings accounts can be a great place to store your emergency funds. They may also be a good place to save for short-term goals like saving for a vacation or a new car.
Pros and cons
Savings accounts can help your money grow by earning interest over time. They can be a great place to keep funds you don’t plan to use right away and can make it easier to set aside money for emergencies or short-term goals.
However, savings accounts may limit the number of withdrawals or transfers you can make in a given period. Depending on the account, you may also need to maintain a minimum balance to avoid fees.
What's the differences between checking and savings accounts
A checking account is designed for everyday spending and convenient access to your money. Most checking accounts don’t allow you to earn interest. Savings accounts do, though interest rates for traditional savings accounts may be lower than other accounts, like certificates of deposit (CDs).
Savings accounts are designed for storing — not spending — money. If you find yourself frequently transferring funds out, it may be harder to reach your savings goals. Unlike checking accounts, which typically allow unlimited transactions, your bank may also limit the number of transfers and withdrawals you can make from your savings account each month.
| Feature |
Checking account |
Savings account |
|---|
| Access and usage |
Unlimited transactions for everyday spending |
May limit transfers and withdrawals |
| Interest rates |
Typically low or no interest |
Earns some interest |
| Fees and charges |
Potential fees for overdrafts, insufficient funds or monthly maintenance |
Potential fees for overdrafts, insufficient funds, exceeding transaction limits or monthly maintenance |
| Often best for |
Daily spending, bill payments and frequent transactions |
Saving for short-term goals, keeping an emergency fund |
Should you have both a checking and savings account?
Having both a checking and a savings account can be a smart move since they serve different purposes. A checking account gives you convenient access to your money for everyday spending, while a savings account helps your balance grow by earning interest over time.
How to use both accounts for financial management?
To get the benefits of both checking and savings accounts, you might consider:
- Linking your accounts: Most banks allow you to link your checking and savings accounts online so you can easily transfer money from one account to another. It’s especially easy to transfer money if your bank offers online banking or a mobile app. Linking your accounts could also help you avoid overdraft fees if your bank offers overdraft protection.
- Using direct deposit and automatic transfers: If you get paid via direct deposit, you may be able to split your paycheck between checking and savings accounts. Your bank may also allow for automatic transfers, so you can move money from your checking account to your savings account regularly.
- Using checking for spending and savings for growth: Keeping these accounts distinct can help to make it easier to track expenses, stay within budget and grow your savings.
Disclosure: This article is for general educational purposes. It is not intended to provide financial advice. It also is not intended to completely describe any Citi product or service. You should refer to the terms and conditions financial institutions provide for various products.
