Checking vs savings account is a common comparison for individuals choosing their next bank account.
In this article, we’re going to share everything you need to know in order to compare these two account options. We will also answer common questions we receive about checking and savings accounts below.
This article is part of our series on banking basics, ranging from opening different types of bank accounts around the world to understanding how various aspects of the banking system operate.
Feel free to use the table of contents to jump ahead to the sections most relevant to you.
Table of Contents
- Checking vs Savings Account
- Benefits of Checking vs Savings Accounts
- What Do You Need to Open a Bank Account?
- Frequently Asked Questions
- Do You Want Help Opening Bank Accounts?
Checking vs Savings Account
The main difference between a checking account and a savings account is that a checking account is a transactional account while a savings account is a deposit account intended for accumulating savings over time.
As a result, there are differences in features, benefits, liquidity, and banking services that can be drawn when looking at a direct comparison between these two account types.
Additionally, savings accounts tend to offer interest rates on the balance of the account while most checking accounts do not.
Not surprisingly, having a checking account and a savings account as an individual is important in terms of proper financial management. Likewise, ensuring that you are using both accounts correctly is an important step in personal finance.
While the term checking account is primarily used in the United States, the United Kingdom and members of several other countries refer to checking accounts as a current account.
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Benefits of Checking vs Savings Accounts
The benefits associated with both checking accounts and savings accounts come down to the purpose of the accounts and how they are used. We’ll explore each of these accounts individually below.
Benefits of a Checking Account
- Everyday transaction activity
- Immediate liquidity
- Access to funds through ATMs, tellers, and transfers
- Easy online and mobile banking access
- Ability to arrange direct deposits
- Ability to arrange automatic payments
- Overdraft protection (in certain instances)
Benefits of Savings Accounts
- Ability to earn interest on deposits
- Relative liquidity compared to longer-term options
- Limited access to support savings goals
- Secure deposits when within insured limits
What Do You Need to Open a Bank Account?
What you need to open a bank account depends on the specific bank, bank account, jurisdiction, and details of your client profile. That said, there are standard requirements that most banks will require you to submit for both checking and savings accounts, which we outline below.
What Do You Need to Open a Checking Account?
- Qualifying age (18 years old)
- Government-issued identification
- Tax identification number
- Qualifying deposit (usually higher than savings accounts)
- Proof of address
- Completed bank account opening application
- In-person meeting (not always required)
What Do You Need to Open a Savings Account?
- Qualifying age (varies by bank)
- Government-issued identification
- Tax identification number
- Qualifying deposit (usually lower than checking accounts)
- Proof of address
- Completed bank account opening application
- In-person meeting (not always required)
Frequently Asked Questions
Below are a few of the most common questions we receive from people looking into a checking vs savings account. If you have further questions you would like to ask our team, don’t hesitate to get in touch.
How Much Money Should You Have In Your Checking Account?
The amount of money that you should have in your checking account depends on your short term cash requirements, the opportunity cost of other investments, and how comfortable you are holding cash with your bank. Needless to say, in all cases, you should never keep more than the government insured amount in an account.
Is It Better to Keep Money In a Checking Account or Savings Account?
In most cases, it is best to keep money in both a checking account and a savings account. This is because both accounts serve very different purposes. A checking account supports day to day transactions while a savings account allows individuals to meet their savings goals and rewards long term saving behavior.
Do Checking Accounts Earn Interest?
While certain checking accounts do earn interest, the vast majority of checking accounts do not. Instead, interest is generally earned on savings accounts, which encourage longer term savings behavior.
Is a Debit Card Issued With a Checking or Savings Account?
A debit card can be issued with both a checking account or a savings account, though it is usually issued with a checking account. That said, in most cases, an individual has a single bank card tied to all of their accounts at a financial institution. So, they can usually access both their savings accounts and their checking accounts from ATMs.
Is Money Safer In a Savings Account Than Checking?
Generally speaking, money held in a savings account and a checking account at the same bank are equally safe. This is because both savings accounts and checking accounts are federally insured accounts in the United States. Therefore, as long as the balance is below the maximum insured deposit amount and the deposit is held at a federally insured financial institution, both a checking account and a savings account are considered safe.
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