Most banks offer both savings and checking accounts as a way to store and save money with their institution. Both types of accounts allow individuals to save money in the bank while still being able to access it for their own use. However, the ease of access and convenience of using the account, such as for paying bills or writing checks, differs between the two types of accounts.
Definition of Savings Accounts
Savings accounts are designed for long- or short-term savings, not for frequent use. Savings accounts may have an ATM card associated with them, especially if you also have a checking account with the same bank. However, withdrawals from savings accounts may be limited, and an ATM card associated with a savings account usually can't be used at stores or online to pay for purchases. Withdrawals are usually conducted at the bank itself, sometimes using a passbook that records all transactions into and out of the account.
Definition of Checking Accounts
A checking account is a convenient account designed to allow you to put money in the bank and gain immediate access to your money whenever you need it. Checking accounts allow you to write checks directly from the account to pay for items. They also generally have a debit card associated with them that allows you to pay for items and get money from an ATM.
Transfer Differences
Checking accounts are generally more convenient overall versus savings accounts. The ability to deposit and withdraw money is more limited with savings accounts. Because checking accounts and savings accounts are designated differently by the U.S. government, there are some federal regulations for the two types of accounts. Checking accounts are considered transaction accounts and can have an unlimited number of transfers out of the account each month. Savings accounts are limited to five or fewer transfers out of the account per month since they are considered non-transaction accounts.
Interest and Costs
Both savings and checking accounts can earn interest, depending on the bank and the specific type of account. Savings accounts generally earn more interest than checking accounts do, operating under the idea that the individual will be storing the money in the account for a long period of time.
The costs of savings and checking accounts also vary. Banks offering savings accounts generally have few or no fees associated with these accounts. Checking accounts often have a variety of fees attached to them, including monthly service fees, fees for ATM or debit card use and fees for any other services the bank might attach to that account.
Requirements
Savings accounts are usually easier to get than checking accounts. Most banks issuing checking accounts will look up the individual's checking account history through the ChexSystems electronic system, which operates similar to a credit check for checking accounts. Any history of fraudulent or bounced checks in the applicant's past could cause a rejection. Savings accounts do not generally go through this process, so opening one is a fairly simple process.
Member Comments