Most of us are aware that savings and checking accounts are different, but exactly how different are they, and what are the benefits of each? Both will help you manage your money and stay on top of your finances, but they each will serve a different purpose in your financial journey. Here is everything you should know about opening checking and savings accounts.
Checking accounts are used for transactions that you make daily, essentially “in place” of cash. You can make these transactions using a debit card, writing a check, or withdrawing cash from an in-network ATM (out of network ATMs may charge you fees) or your bank. You can also use your checking account(s) to receive ACH deposits or wire transfers from other banks/accounts. Cash or checks can also be deposited into your checking account at your in-person branch or by mobile check deposit, which most banks today offer.
Checking accounts make it easy to make regular transactions and payments such as monthly bills and day-to-day purchases. Some checking accounts accrue interest, but the interest rates are typically quite low if anything. Before choosing a checking account, it’s important to consider factors such as interest rate as well as if there are any associated fees (e.g., monthly maintenance fees), a minimum balance requirement, and any daily limits for withdrawals and deposits. You may also find checking accounts that offer special benefits for opening an account, such as a $200 cash bonus.
Savings accounts are designed for just that — saving. These accounts are where you set funds aside to accrue interest and are not meant for daily (or even regular) use. Savings accounts can be used for emergency funds, saving money for a large purchase or vacation, a down payment on a home, and other such significant purchases. As a “reward” for keeping money in their savings accounts, banks offer higher annual percentage yield (APY), or interest rates. It’s important to investigate your options, because some savings accounts offer very low interest rates while some offer upwards of 5%. Most of the higher rates you will find come with online savings accounts, because online banks have lower operating costs and can therefore offer higher rates.
Keep in mind, since savings accounts are meant for saving, some financial institutions may charge you a fee if you exceed a certain amount of transactions in a set period of time.
Which Should You Choose?
Whether you open a checking or savings account all depends on your unique financial needs. Many people use both simultaneously to meet different goals. If you own a small business, you’ll want to have a business checking account (and potentially savings account) that is separate from your personal accounts to set business transactions apart. Always be sure to do your research before opening an account, and look for fees, interest rates, accessibility in person and via mobile, etc. Understanding all your options will ensure you pick the right accounts for you.
Need help choosing a checking or savings account? At Republic Bank, we have several great options for both personal and business accounts. To learn more, visit our website or call 800-526-9127 to speak with one of our bankers!