Checking and Savings account: Which is best for you



checking and savings

If you’re not one of the roughly 14.1 million “unbanked” adults, then you’ve probably asked yourself this question before. But if you’re trying to decide which kind of account to open, also consider that you can actually open both types of accounts—it doesn’t have to be one or the other. In fact, there are advantages to having both checking and savings accounts at your disposal. 

But before we get into that…

Why do you need a bank account in the first place?

Bank accounts offer advantages that cash-only living cannot. Not only is your money protected inside of the bank, meaning that you don’t have to worry about things like  break-ins or misplacing your piggy bank, but you can also access that money much easier.

Most banks now offer several convenient methods to maintain control over your accounts, giving you easy access to your money whenever and wherever you need it. As well, many accounts have benefits for being a member, including earning interest simply by opening an account.

Checking and Savings account

The similarities

Checking and savings accounts are among the most basic services that banks provide.

A bank will pay you interest for allowing them to lend out to other customers (in the form of loans or credit) the money that you deposit into their vaults for safekeeping:

  • Both types of accounts allow withdrawals and deposits
  • Institutions like The Federal Deposit Insurance Corporation insures up to $250,000 per depositor per member bank. This isn’t necessarily something that you should worry about, since banks are tightly controlled and regulated, but consider this an extra security blanket for your peace of mind.
  • Depositors can access their funds or manage their accounts through several channels, including ATMs, debit cards, and mobile/online banking platforms. This lessens the need to visit an actual branch.

The differences

So, both types of accounts are quite secure and easily accessible.

Simple so far, right? Now, let’s get into some specific features that differentiate them, and find out how and when you might favor using one over the other.

Checking Account: Your Friendly Neighborhood Wallet

  • Use for: Everyday spending money, regular transactions and expenses
  • Strengths: Lower fees, overdraft protections
  • Weaknesses: Low/no interest, occasional limits

The main feature of a checking or current account is evidenced by another name it goes by in some countries: the transaction(al) account. This basically means that the funds deposited into these accounts are always available and accessible through a number of channels (most notably in the form of writing checks), although these accounts typically don’t earn as much interest.


Checking accounts generally carry overdraft protection, which comes into play when you write a check or make a purchase that exceeds the actual balance in the account. Banks will usually be able to cover this excess, but will charge heavy overdraft fees on the outstanding balance of this ‘loan’ (this is effectively a line of credit). If you don’t think you need this, ask your bank if it’s possible to opt out of (or limit) the overdraft facility on your account.

Savings Account: VIP Parking for Your Money

  • Use for: Growing money that you don’t intend to spend on a regular basis
  • Strengths: Interest-bearing, versatile applications
  • Weaknesses: Transaction limits, higher fees

Unlike checking accounts, the primary feature of savings accounts is that they always earn interest. With the exception of earning interest and not being able to write checks, savings accounts these days offer pretty much the same transactional benefits as a checking account.

Emergency funds

A pair of worrying statistics shows that 39% of Americans don’t have enough saved to cover a $1,000 emergency, and that a whopping 55 million individuals don’t have any emergency savings at all.

Experts recommend maintaining an emergency fund worth around 3 to 6 months of expenses, in the case of medical or personal emergencies. Any excess funds can then go to higher-yield time deposits or invested in longer-term facilities that earn value through conservative compounding or more aggressive brokerage.

Your Weapon of Choice to Help Manage Your Budget

Fortunately for the 40% of Americans who don’t actively keep a budget, one of the most practical advantages of having either type of account is that it would allow you to keep better track of where your money is going.

And now that you have a clearer idea of the respective advantages of both checking and savings accounts, some questions that you can ask yourself when deciding what accounts to open can also be applied to simple budgeting.

These include:

  • What am I spending my money on, and how often?
  • Through which channels am I likely to move funds?
  • How much cash do I want to set aside, and for what?

Even though we said in the beginning that you can actually hold both types of accounts at little to no cost, everyone’s financial positions and objectives vary. It’s important to evaluate each option carefully (with the help of advisors or resources like this article), in order to find the right solutions for your specific needs.

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