According to financial statistics, about 25% of households in the country are unbanked, don’t have a bank account or are underbanked, or have a bank account but rely on other non-traditional financial services. If you are thinking of opening a bank account or not sure of what savings and checking accounts are, here is all the information you would need on savings vs. checking accounts.
The Way These Accounts Are Used
One of the key points between savings vs. checking accounts is the way that they are used. A checking account is good for paying bills, transferring funds and daily expenses. Banks usually offer a nominal interest rate for these types of accounts. A savings account helps you grow your money through the interest earned. They are good for saving for a trip or an emergency fund. Annual percentage yield is the incentive given by banks to ensure that people keep their money in the savings accounts they offer. This rate of interest can vary among banks, however, online banks most often offer better rates.
Withdrawals and Deposits
You can withdraw money from a checking account through an ATM or at a branch of the bank. You can also deposit money in various ways such as cash, check, wire transfer, etc. through a branch or ATM. The number of withdrawals from a checking account is unlimited. The number of withdrawals from a savings account is six, if you exceed this limit you could face a penalty or lose your interest rate offer. Hence, another important difference regarding savings vs. checking accounts is the number of withdrawals allowed.
Fees and Charges
For both checking and savings accounts, you would need to pay a monthly maintenance fee that can be waived in some instances. In addition to this, other fees and charges that you could end up paying for a checking account are overdraft, out-of-network ATM, and foreign-transaction fees. As listed in the point above, you might need to pay a fee or penalty charge for exceeding the number of withdrawals on your savings accounts.
Ease of Access to Funds
The difference in the ease of access to funds between savings vs. checking accounts is also a vital factor to consider. Checking accounts let you withdraw money at any time through an ATM or bank branch. However, with a savings account, you might need to first transfer it to your checking account before making a withdrawal.
With a checking account in addition to manual or automatic bill payments and money transfers you could also get an overdraft facility. A savings account comes with little or no facilities other than internal transfers i.e. from savings to checking account.
You need to remember these points regarding savings vs. checking accounts and open the one that best suits you. If you do want to grow your money or save the little extra cash you have, you could even open both.