Difference Between Checking and Savings Account

Written by Banks Editorial Team
4 min. read
Written by Banks Editorial Team
4 min. read

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Checking and savings accounts let you store money at a bank. Financial institutions gave people a federally insured way to secure their money instead of hiding it under the rug. Some consumers pick between accounts or open a checking account and savings account. Understanding the differences between these accounts can help you prioritize how you allocate your funds.

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What is a Checking Account?

A checking account contains funds you use for everyday purchases. A checking account connects to your debit card, making it easier to conduct financial transactions. Some people prefer debit cards because they can avoid credit card debt and high-interest rates. However, a checking account has the bulk of your financial activity, from money transfers to your investment portfolio to every debit card purchase.

What is a Savings Account?

A savings account is a bank account meant for long-term savings. Some people accumulate money in a savings account for retirement or an emergency fund. You won’t make as much money with a savings account compared to long-term investments in reliable assets, but you earn more with a savings account than with a checking account.

Some people create separate savings accounts for each objective. For example, you can create a savings account for a down payment, vacation, car, and other expenses. Current (*) makes it easy to create multiple accounts and have them connected in the same dashboard.

Checking vs. Savings Account: Key Difference

Checking and savings accounts share basic similarities. You can make deposits to accumulate funds and withdraw money when you need it. However, these accounts have different purposes and functionality you should consider for your financial outlook.

Purpose

A checking account essentially funds your debit card and checks. It’s the first place to go for making transactions. Checking accounts address short-term expenses that correspond with your monthly budget. Savings accounts are better for long-term wealth building and accumulating funds for an important goal. An emergency fund covers surprise expenses, but you may also have money stored in a savings account for a down payment or expensive vacation.

Types

Consumers can select from several types of checking and savings accounts depending on what works best for them. Checking and savings accounts have a variety based on interest rates and features.

Checking Accounts:

  • Traditional checking account
  • Student checking account
  • Senior checking account
  • Business checking account
  • Second-chance checking account
  • Rewards checking account
  • Interest-bearing checking account

Savings Accounts:

  • Traditional savings account
  • High-yield savings account
  • Money Markets
  • Student savings account
  • Certificates of deposit
  • Health Savings Account (HSA)
  • IRA account
Earn 4.00% APY on your Savings

Mobile banking done better. No overdraft fees/hidden fees. Get paid up to two days faster with direct deposit. Earn up to 15x the points on swipes.

Interest Earned

Savings accounts have higher interest rates than checking accounts. You should store long-term proceeds in savings accounts and put funds for short-term expenses in a checking account. Financial institutions offer varying interest rates, but you’ll have a difficult time finding a better offer than a Current Savings Pod. You can put your money into a Current Savings Pod and get 4.00% APY (1) .

You will receive daily payouts that will accumulate over time. Current (*) can provide a superior APY because it has less overhead expenses than traditional banks. As a result, you can put your money to work and get a 4.00% return on your stashed cash.

Access to Your Account

Checking and savings account both provide reliable access. You can log into your provider’s mobile app or website to access your money. The money in your checking account is easier to spend since they are connected to your debit card. However, you can make a quick money transfer from your savings account to your checking account if you need extra reserves for your debit card.

Minimum Balance

Minimum balances vary for each bank, but you can expect a higher minimum balance for a savings account. Checking accounts have a $25-$100 minimum balance to get started, while you may need $500 to open your savings account.

Withdrawal Limits

Checking accounts have no withdrawal limits as long as you don’t overdraw. Consumers can only make six withdrawals per month from their savings accounts due to Regulation D. This government regulation restricts withdrawals, so banks have enough money to meet reserve requirements. In-person and ATM withdrawals do not count towards the limit.

Transfer Limits

Checking accounts have no transfer limits, but savings accounts are a different story. Similar to withdrawals, you can only do up to six transfers per month. Transfer and withdrawal limits are connected. If you make four withdrawals and two transfers this month, you have already hit your limit. Savings account holders do not get to make six withdrawals and six transfers per month (i.e., 12 total transactions). In-person and ATM transfers do not count towards the limit.

Fees

Both accounts have a monthly maintenance fee that you can waive under certain parameters. Both accounts also charge fees if you make a withdrawal that exceeds your balance (overdraft fee and savings withdrawal limit fee). This fee is more expensive for checking accounts, and some banks refunded savings withdrawal limit fees during the pandemic to retain customers. Not every bank charges a savings withdrawal limit fee, and some banks provide protection from overdraft fees. Current has up to $200 in protection from overdraft fees (2) . This protection is convenient for people who overdraw their balances by a few dollars that they can easily repay. Checking accounts may also incur out-of-network and foreign transaction fees if you use ATMs.

Other Features

Both accounts pay interest, enable direct deposits, and introduce you to a bank’s features. Current has spending insights that let you monitor your expenses and discover new ways to save. You’ll get this feature and other advantages regardless of whether you open a personal account or savings pods. Checking accounts have additional features, such as checks, debit cards, and overdraft protection. Not every financial institution offers the latter benefit.

When You Should Choose a Checking Account

A checking account is optimal for short-term expenses. You can use this account to address subscriptions and items on your monthly budget. If you buy anything on Amazon or another e-commerce store, your checking account is the better option.

When You Should Choose a Savings Account

A savings account is better for the long-term investor who wants to build wealth. You can get 4.00% APY with Current, and while most banks can’t compete with that rate, every financial institution provides better interest rates for savings accounts than checking accounts. Emergency expenses, vacation savings, and stash money for a down payment should go into separate savings accounts.

Is There an Advantage to Having Both a Checking and Savings Account?

Consumers would immensely benefit from having a checking and savings account. You can cover short-term expenses with your checking and collect higher interest in a savings account. In addition, creating multiple bank accounts lets you categorize your money instead of lumping it into one account. Putting your money in a single account can make it more challenging to keep up with goals and distinguish how to use your money optimally.

Are There Disadvantages in Having Both?

Having both bank accounts presents minimal to zero downsides. You may have slightly higher fees if you can’t get the maintenance fees waived. However, if you get the fees waived or partner with a bank that doesn’t have those fees, there isn’t a disadvantage in having both accounts.

Where to Set Up Your Checking and Savings Account

Checking and savings accounts allow you to store money and build wealth. Several banks offer these accounts, but few of them have the same perks as Current. Current offers 4.00% APY on their savings pods and up to $200 in overdraft protection. You can create an account on Current by visiting their website or downloading the Current mobile app.

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Current is a financial technology company, not a bank. Banking services provided by and Visa® Debit Card issued by Choice Financial Group, Member FDIC, pursuant to a license from Visa U.S.A. Inc and can be used everywhere Visa debit cards are accepted.

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The Annual Percentage Yield ("APY") for Current Interest is variable and may change at any time. The disclosed APY is effective as of January 1, 2022. No minimum balance is required. Must have $0.01 in savings pods to earn Current Interest on up to $2000 in deposits per Savings Pod up to $6000 total.  Please refer to Current Interest Terms and Conditions.

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Current is a financial technology company, not a bank. Banking services provided by and Visa® Debit Card issued by Choice Financial Group, Member FDIC, pursuant to a license from Visa U.S.A. Inc and can be used everywhere Visa debit cards are accepted.

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Please refer to Overdrive™ Features Terms and Conditions. Current Premium Accounts only.

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