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Difference Between Checking and Savings Account

Have you ever asked what is the difference between a checking and savings account? It’s more than likely you’ve come across both checking and savings account at some time or another.  

While they are both legitimate means of safely stowing away money, there are fundamental differences between the two types of accounts.

In this article, we’ll explore the definitions of the two accounts as well as the difference between checking and savings account. We’ll also dive into the pros and cons of both types of accounts. You’ll get a better understanding of how you can utilize a checking vs savings account to further your financial goals.

Savings vs Checking

Before diving into the difference between checking and savings account, let’s first start with defining what these two accounts are.

Savings Account

As the name implies, a savings account is a way to safely stow away money for the primary purpose of saving. While your money is inside the account, it generates interest. The interest for a savings account is generally variable, so you might see it go up or down over time.

While there is a withdrawal limit for a savings account, access to your funds is relatively easy. The ease of access makes this type of account ideal for the purposes of an emergency fund or any short-term saving goals.

A savings account is federally insured by the Federal Deposit Insurance Corporation (FDIC). This guarantees your money will be safe, even in the rare case your bank goes under.

Checking Account

A checking account is a type of account held in banks or credit unions that allows for frequent deposits and withdrawals. The liquid nature of this account permits for all types of transactions, including access from debit cards, ATMs, checks, and more. This flexibility allows the account holder to pay bills, shop for groceries, or make withdrawals at any time.

Because of the liquidity of a checking account, interest rates are either very low or even non-existent. There are exceptions, however, as some banks can offer higher than normal interest rates.

The FDIC insures funds up to $250,000 (per institution), so having money in your checking account is just as safe as a savings account.

Similarities and differences you need to know

Below, we’ll examine the similarities and differences between a checking account vs savings account.


While the two accounts fundamentally serve two distinct purposes, they do both share some commonalities. These similarities include:

  • Secure way to store cash: Both checking and savings accounts are FDIC insured. You can stow away your money without worrying about losing it.
  • Accounts held at banks or credit unions: Banks or credit unions offer both these types of accounts. You can hold both types of accounts conveniently in one bank if you choose.
  • Cash only: Generally, only cash is permitted inside both checking and savings accounts (rather than stocks or mutual funds).
  • Ease of access: Both accounts are relatively easy to access. Same-day withdrawals or deposits are common with a checking or savings account.


Here are some differences between a savings vs checking account:

  • General use: The main difference between checking and savings account is its general usage. A checking account is for daily and frequent transactions, where a savings account is primarily used for savings.
  • Interest rate: Interest rate averages about 0.09% for a basic savings account type. Checking accounts, on the other hand, are typically lower or may not even pay interest at all. 
  • Withdrawal limits: While savings accounts have a withdrawal limit of six per month, checking accounts have no limits on the number of transactions.
  • Access: You’ll have more options in accessing your funds with a checking account. For example, you can access your funds via a debit card, checks, branch, and ATM services, among others. A savings account generally limits access through branch and ATM services (there are exceptions).

Pros of Savings

A savings account has many pros, including:

1. Interest payments

A savings account typically offers interest payments based on your balance. While the rates are relatively low (i.e. under 1%), it is better than nothing. Over time, the accrual of interest, coupled with regular deposits, can help grow your cash reserves. Rates also vary depending on where you look, so shop around to get the best deals.

2. High liquidity

Compared to other saving vehicles, like certificate of deposits or bonds, access to your savings funds is quick and easy. Simply visit your branch or ATM, and you’ll be able to deposit or withdraw the same day.

3. Safe

As mentioned, all savings accounts are FDIC-insured. This guarantees your money will not be lost in the scenario your bank collapses.

4. Savings goals

A separate savings account will help you track your savings goals much easier. You can make regular contributions to your savings account and monitor how close you are to your goals. A separate savings account also reduces the temptation to constantly dip into your funds on a whim.

5. Minimal requirements

Most basic savings accounts have very minimal requirements in opening an account. For a mere $25, you can open an account and start on your savings journey. Some banks may even require less.


Pros of Checking

Here are some reasons why a checking account would be beneficial for you:

1. No transaction limits

When comparing the difference between savings and checking accounts, the main advantage checking accounts have is it has no transaction limits. This allows you to spend on daily expenses, such as groceries, gas, utility bills, etc. without being penalized.

2. Convenience

Carrying cash can be a hassle and cumbersome. A checking account will come with a debit card that simply deducts from your cash reserves when you make a payment. No need to fumble for coins or figure out exact change while holding up the line at the checkout aisle.

3. Tracking your spending

It’s difficult to track your spending when you use cash. Your only option, in this case, is to collect receipts and manually record your payments.

With a checking account, you’ll know exactly where and how much you’ve spent. Simply check your monthly account statements or hop online, if you have online banking, to view all your spending details.

4. Minimal fees

Fees for checking accounts are typically very low or non-existent. This allows literally anyone to open up a checking account. The only potential fees may include overdraft or out-of-network ATM fees, which is easily avoidable.

Cons of Savings

Savings accounts have their drawbacks and limitations. Here are some cons of a savings account:

1. Transaction limits

Transaction limits are a key difference between checking and savings account. With a savings account, federal regulation limits you to a maximum of six withdrawals per month. If you go over this limit, you’ll be subject to hefty fees.

There are ways around the six withdrawal limit. Visiting an ATM or teller, for example, won’t count towards the six-transaction limit.

2. Low return on investment

If you’re looking for long-term growth, a savings account may not be ideal. The relatively low interest rates cause a low return on investment. Other investment vehicles such as stocks, bonds, ETFs, etc. may be more suitable for long term growth.

3. Ease of access

Accessibility is a double-edged sword. While it is certainly advantageous to have easy access when you most need it (i.e. emergency fund), it can also be tempting to reach in when you truly don’t need it. Unnecessarily dipping into your savings account defeats the purpose of this type of account – namely, for savings.

4. Limits on insurance

The FDIC insures a total of $250,000 per institution, per category. This means for those with over $250K in your savings (and checking) account, the excess will not be covered by the government.  

One way to get the remainder of your cash insured is to spread out your savings in different institutions. For example, if you have a total of $300K, you can place $250K in a savings account from Bank 1. The remaining $50K can sit in a savings account from Bank 2. Having your money sit in two separate institutions will guarantee your money won’t be lost.


Cons of Checking

Some cons of a checking account are as follows:

1. Low interest rates

The tradeoff for high liquidity in a checking account is nominal or zero interest rates. This makes it not ideal for large reserves of cash to be sitting in this type of account. If you’re looking for growth, consider a savings account or other investment vehicles.

2. Easy to spend frivolously

While the purpose of a checking account is for daily transactions, the ease of access makes it tempting to spend frivolously. There are no transaction limits, and all you need is a debit card to spend. For those who are less disciplined, this could lead to a  quickly depleting bank account.

3. Potential of blocked access

Banks can block access to your bank account at any time if they suspect anything out of the ordinary. While this can be beneficial when your account gets compromised, it can also be extremely inconvenient when you’re, say, traveling abroad and require immediate access.

4. Cannot build credit score

Unlike a credit card account, responsible use of your checking account does not build up your credit score. On the other hand, negative actions, such as an overdraft, can negatively impact your credit score.


Simply put, a checking account is a type of bank account that is designed for everyday use via your debit card. Whereas the money in your savings account is for just that, saving. Both are essential to living a debt free life. At CreditAssociates we help to drastically reduce your debt, contact us to learn more about resolving personal debt.