The Differences Between a Checking and a Savings Account

There are several differences between a checking and a savings account, but the most important one is how easily you can access your money. A checking account is intended for spending; it lets you make unlimited transactions and offers tools to make everyday purchases easier. A savings account is intended for, well, saving. It limits your access to your money but pays interest so your funds grow.

Differences Between a Checking and a Savings Account

What is a Checking Account?

A checking account is a transactional account. It’s designed to make your everyday spending easier. A checking account is good for making purchases, paying bills, and receiving direct deposits. Like your wallet, a checking account is a good place to store money short term, where it will be handy when you need to spend it. Research checking account options:

What is a Savings Account?

A savings account is an investment account. It’s designed to keep your money safe – from your own impulsive spending as well as from theft or loss. A savings account is good for building rainy-day funds and saving towards long-term goals or big-ticket purchases. Like your piggy bank, a savings account is a good place to store money long term, where it will be safe until you’re ready to spend it. Unlike the piggy bank, though, a savings account earns interest. ct deposits. Like your wallet, a checking account is a good place to store money short term, where it will be handy when you need to spend it.

What Do Checking Accounts and Savings Accounts Have In Common?

You can open a checking or The Differences Between a Checking and a Savings Accounta savings account at any bank or credit union. Both checking and savings accounts are insured for amounts up to $250,000 per depositor, per account, per institution. The Federal Deposit Insurance Corporation (FDIC) insures accounts at banks, and the National Credit Union Association insures accounts at credit unions. Both types of accounts allow unlimited deposits. And both typically allow online transfers; if you have both a checking and a savings account, you can link them together and transfer money between them.

What are the differences between a checking and a savings account?

The major differences between a checking and a savings account lie in how frequently you can access your money and what tools you can use for transactions. Minor differences include typical interest rates, fees, and minimum balances.

Access to your funds

A checking account allows unlimited transactions; savings account limits you to 6 withdrawals or transfers per month. Different banks may have stricter limits, but the monthly limit of 6 is federally imposed on all savings accounts. Only “convenient” withdrawals are limited, so you can still go to the bank and withdraw your money as frequently as you’d like, but the limit does apply to online transfers and overdraft transfers.


Speaking of overdrafts, they constitute another of the differences between a checking and a savings account. A checking account can be overdrawn; a savings account cannot. To overdraw an account means to take more money out than you’ve put in. While that might sound like a great deal for you, it obviously poses a problem for the bank, so there are strict penalties and fees for overdrawn accounts. If you have both a checking and a savings account with the same institution, you may be able to use your savings account as overdraft protection for your checking account.

Tools for transactions

A checking account includes a host of tools to make daily transactions more convenient; a savings account does not. A checking account typically comes with a debit card and a checkbook; some banks also offer smartphone apps. A debit card gives you ATM access to your account and can be used to make purchases like a credit card; it also allows you to get cash back at many stores. A savings account might include ATM access, but it will not offer most of these tools. A checking account also offers features like direct deposit, wire transfers, and automatic bill pay that a savings account doesn’t have.

Interest rates

A savings account always pays interest; a checking account typically offers very low interest or often none at all. Traditionally, savings accounts have paid significantly higher interest rates than checking accounts. Today, interest rates are so low across the board that the difference is much less significant. A high-interest online savings account might pay as much as 1.5% – 2% APY, but the 2018 national average yield for savings accounts is only 0.06%, compared to 0.04% for interest-bearing checking accounts.

Interested in upgrading to a higher-interest account? Check out this list of accounts with the highest interest rates.


A checking account typically has more associated fees than a savings account. Partly this is because you can do more with a checking account, and some of those features incur fees. Your bank might charge a fee, for instance, if you make a withdrawal from another bank’s ATM, and it will almost certainly charge a fee if you overdraw your account. A checking account also has higher administrative costs than a savings account, as the bank has to monitor more transactions. And, as discussed below, fees are a bank’s typical source of profit on a checking account; the bank makes money on a savings account in another way.

Minimum balance

A savings account typically has a minimum balance required to open the account and to keep it active. A checking account may have a low minimum required balance, or it may not require a minimum balance at all.

How Banks Make Their Money

The last of the differences between a checking and a savings account is in how banks profit from each account type. A bank has long-term access to the cash in your savings account, so it loans most of your money to someone else, at a higher interest rate than it pays you. This profit model doesn’t work for a checking account, though. Your checking account balance can fluctuate, frequently and significantly; you could withdraw a large sum of money at any time. That uncertainty means the bank has to hold more of your money in reserve, so it can’t earn much by lending it out to someone else at higher interest. Instead, the bank makes most of its money by charging fees on your checking account.

Ready to open an account? Compare rates, fees, and other features on accounts in your area with this online tool.

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