Among the many financial strategies we can possibly start, opening a bank account is the most basic step to take control of your finances. Whether you already have a running payroll account or are looking to start a new one, you will always be prompted by these two: Checking and Savings Accounts.
While both are advantageous to stay on top of your resources, each has distinct functions. And the primary differences are in how they are used.
Checking Account Vs. Savings Account
A checking account comes with the benefits of both check-writing capabilities and a debit card aside from making deposits and withdrawals. Checking accounts typically have no monthly withdrawal limits and are ideal for everyday expenses such as bills payment, and even electronically transfer money to an account of a different bank. Since you can access your checking account for frequent transactions, you’ll earn less interest on your deposits.
As the name implies, Savings Accounts are used mainly to stash the money that you don’t want to spend immediately. Since the account is intended to safekeeping your fund, banks limit the monthly withdrawal typically set to six times. Savings Account funds earn higher interests over time. Annual Percentage Yield (APY) varies per bank, and the national savings rate averages at 0.05% as of January 2021.
Now, let’s take a look at the key differences.
|Primary Use||Savings with limited risks||Regular expenses|
|Fees||Minimum balance fee, monthly maintenance fee, overdraft fee, savings withdrawal limit fee||Minimum balance fee, monthly maintenance fee, overdraft fee, out-of-network ATM fee|
|Interest||With varying interest rates||With varying interest rates|
|Minimum Balance||Varies by bank||Varies by bank|
|Withdrawal Limits||Mostly limited to six (6) per month||No limits|
|Others||Linked to a debit card, paper checks, and other online payments||Can be used as overdraft protection for your checking account|
While both accounts are important to have, it is also important to know the limitations and benefits of each.
|Checking Account||No Withdrawal LimitEasy to use for everyday transactions||Lower interest-earning than Savings accountNot suitable for long-term saving|
|Savings Account||Offers higher interest-earning than checking accountAllows you to grow long-term savings||With limited monthly withdrawalNot ideal for frequent transactions|
Now that we’ve covered the basics, the next thing you would want to find out is where to open your account. It may be easy to open up bank accounts at the closest and most accessible financial institution to you, but you might want to consider factors such as APY, monthly fee, and minimum balance for no-fee so you could make sure that you are making the most out of your hard-earned money.
Top 5 Checking Accounts
Based on a minimum account balance of $2,500 and a monthly direct deposit of $1,500.
|AXOS Bank Reward Checking||1.25%Est. 1 year gain $31||$0Balance for no fee $0||No minimum balancePurchase Rewards ProgramReduced ATM fees|
|Quontic High-Interest Checking||1.01%|
EST 1 year gain $25
|$0Balance for no fee $0||Minimum opening deposit of $100No monthly service feesAPY is basd on the account balance|
|Alliant Credit Union High-Rate Checking||0.25%EST 1 year gain $6||$0Balance for no fee $1||No ATM FeesATM Rebates up to $20/month for out-of-network ATMs (excludes 1% Visa foreign transaction fee)|
|NBKC Bank Everything Account||0.15%EST 1 year gain $4||$0Balance for no fee $0||$0 minimum balanceUp to $12 refund for ATM fees other banks charge you$0 overdrafts or NFSs|
|Capital One Money:Teen Checking Account||0.10%Balance for no fee $3||$0Balance for no fee $0||No monthly fees or balance requirementsComes with a free debit card and a top-rated mobile app|
Top 5 Savings Account
Based on a minimum account balance of $2,500.
|One Save Savings||1%Balance for no fee $25||$0Balance for no fee $0||Earn 1.00% APY available on Save balances up to $5,000, up to $25,000 with a qualifying paycheck direct deposit.3.00% APY on up to 10% of your direct deposit.|
|AXOS Bank High-Yield Savings||0.61%Balance for no fee $15||$0Balance for no fee $0||No monthly maintenance feesNo minimum balance requirements|
|Quontic High-Yield Savings||0.55%Balance for no fee $14||$0Balance for no fee $0||No monthly service fees$100 minimum requirement to open an account|
|Alliant Credit Union High-Rate Savings||0.55%Balance for no fee $14||$100Balance for no fee $0||No monthly fee if you select eStatementsWaived $5 initial deposit required|
|Comenity Direct High-Yield Savings||0.55%Balance for no fee $14||$100Balance for no fee $0||$100 minimum opening depositInterest earning is accrued and compounded daily|
How to Choose the Best Savings and Checking Accounts?
Your decision when looking for the best saving and checking accounts is framed by how your finances look like, the benefits you are looking for, and your purpose. While the best financial plan is the one that makes the most sense to you, we have listed our evergreen strategies as a starting point to maximize your money and banking experience. Find out more about the purpose of savings account.
- Minimum Opening Deposit. Opening a new account must not be intimidating, especially if you don’t have that much cash on hand. Generally, most banks would require a certain amount but, on our top 5 list, you’ll find that they do not require a minimum deposit and no monthly fees but still offer high-yield interests.
- No Monthly Maintenance Fees (or easy ways to waive them). This can go as much as $20, depending on your bank but can be avoided if you meet a certain minimum balance or minimum transactions per month. Be sure to understand what other fees are, such as Overdraft, ATM fees, and Monthly Maintenance so that you can avoid them.
- Access to ATMs Nationwide for Free. Look for banks that would allow you to access your money easily and with no surcharges from its shared branches across the country. Some banks offer rebates when you draw money from a different bank.
- FDIC Insurance Protection. Federal Deposit Insurance Corporation protects the account holder’s money should the bank goes out of business. The standard insurance amount is $250,000, and all reputable banks must guarantee the insurance protection.
- A Competitive APY. Usually expressed in percentage, APY, or Annual Percentage Yield is the interest you’ll earn from your balance. Most checking accounts do not pay interest, but this must be considered with savings accounts. Our top 5 best Savings Accounts present APY that is significantly higher than the national average.
- Secured Mobile or Online Banking Benefits. Consider banks that provide an easy digital way of accessing your money and allows you to make transactions online, anytime, anywhere, without compromising your security. In addition, online banks tend to offer higher APYs and require no fees and minimum balance.
Why Should You Get Both?
It’s easy to compare both side by side, and you might find that one is more suitable for your needs and financial goals than the other. But you’ll actually benefit most when you apply for both Checking and Savings Accounts.
With Checking Account, you can draw money easily, write checks, make debit card purchases without limitations, While Savings Account will give you dedicated saving space, particularly a high-yield APY one, to threshold your expenditure because of its moderated access.
We Are Answering Some of Your Most Common Questions:
1. How Much Interest Your Savings Could Earn?
When you put your money in an account that offers an APY higher than the national average of 0.06%, you can grow your fund quicker without much effort. Here’s our comparison.
|APY||1.00% APY||0.10% APY(a little above the average of 0.06%)|
|Savings Account Balance||$3,000||$3,000|
|Your Interest Earnings (Annual Savings Interest)||$30||$3|
In our sample computation, both APYs have the same balance and are observed to grow in one year. With the 1.00% APY, you will most likely earn 10x more than the competitor. Do note that some banks and credit unions offer interests that could be up to 20x the national average. That’s why it is important to find which bank or credit union could give you the most yield when growing your money.
2. Is Debit Card Checking or a Savings Account?
Debit cards are issued as a transactional tool linked to your Checking Account. So every time you make purchases, draw money from an ATM or make online purchases or payments using your debit card, you are actually accessing your Checking Account funds.
3. Checking vs Savings Account: Which is Better?
The answer entirely depends on your personal circumstances and goals. While each may have different purposes, having both a checking and savings accounts can have tremendous benefits to manage your money better. Just keep in mind that while you make sure you get all your expenses and bills covered, you might also want to have a secured account for long and mid-term savings.
By now, you already have an idea where to put your money that would allow you to make easy daily transactions and make room for savings. To recap:
Choose Checking Accounts When:
- Paying Bills and Purchases Electronically or through Checks
- Completing purchases using your debit card
- ATM Withdrawal or Wire Transfer
Choose Savings Accounts When:
- Setting aside money for long-term or mid-term goals like high purchase investments
- Looking to grow your money that you don’t intend to spend immediately
- Planning to start saving and limit your expenses
If you have come this far and you are already thinking about balancing your finances, you are basically already planning a secured and insured life ahead. Our experts regularly share more money-management tips so be sure to subscribe to the Filife Newsletter!