Checking Account vs. Savings Account

When setting up an account at the bank one of the first questions you will have to answer is whether you would like a checking account or a savings account. Both accounts come with different features and it's important to understand them before deciding on a checking account or a savings account.

Checking Account

A checking account at a bank is one you would typically use for your daily transactions. They are usually set up to have little to know transaction charges, with the only charges being the basic account cost and for using ATM's out of your banks network.
Some accounts come with a limit on the number of transactions you can make each month before fees start to be charged, so it is important to read the small print and be aware of any potential hidden fees.

Checking accounts typically offer very low interest rates on your deposits, however, so they are not the ideal place to actually accumulate any savings. The balance you retain in the account should really be limited to what you are actually planning on spending each month.

Savings Account

A savings account at a bank is the account you would use to put cash you are planning on saving. Many savings accounts will have transaction fees associated with them, though some accounts provide a limited number of free ones. With some banks you may not even be able to access your account from non-network ATM's so it is important to be aware of this if it applies to your card.

The key benefit of a savings account over a checking account is that they will provide a higher interest rate on your deposits. As such any cash you save here will earn more income over time, providing a tangible benefit to having a savings account. The interest rates are often still fairly low, but it will at least ensure that you are earning more money on your deposit than you are losing to inflation.

Many individuals choose not to have a savings account and instead move their excess cash into some form of investment when they have enough to make a contribution. This works if you have a steady flow of income coming in but if you would like to have a quick and easy source of cash available, and have that cash generate some income for you, a savings account can be a good resource.

Checking Account vs. Savings Account

When choosing the account that best suits your needs you need to consider what your general banking profile is. Do you make a lot of transactions each month? Do you need to have quick access to your excess cash? These questions will help drive whether or not you need a checking account or a savings account to support your banking needs.
By Jeffrey Glen

Copyrighted 2016. Content published with author's permission.

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