Checking vs Savings Accounts

by Francisco Javier ArceoDecember 24, 2019

We’ve talked about checking and savings accounts a little bit before but we wanted to give more detail on what these products are and why they matter.

If you’re deciding whether to open a checking account or a savings account, you’re already on the right path!

Checking and savings accounts are the safest way to store your money, they’re insured and protected by the government, and having a bank account makes it easy to make purchases, withdraw money, and even save some money while you’re at it!


A checking account is essentially an account meant for everyday use (sometimes called a transaction account).

There is very little interest earned on a checking account and they sometimes have fees and minimum balance requirements, which means you need to have at least some amount of money in the account or they will charge you to put your money there (we don’t like this).

A savings account is an account that’s meant to save your money and not meant for transactions. This can be for savings for vacations, college tuition, emergencies, or even a down payment on a house.

The important number that decides how much you earn from your money is the interest rate. An interest rate is the rate at which the bank pays you to hold your money.

Interest rates can be really low or reasonably high depending on which bank you’re using. We recommend using an online savings account as they usually have the highest interest rates. The higher the interest rate and the more money you have in your account, the more interest you’ll earn!

For example, if you have a savings account with a 1.5% APY (annual percentage yield) and a $10,000 account balance, you’ll earn $150 for the year.

It’s worth emphasizing that the APY can go up or down and the bank has to let you know that it’s changing your rate. Also, banks offering the highest APY typically have a minimum account balance, so make sure you’re meeting that minimum so you don’t pay any fees.

Setting money aside can really start to add up if you’re consistent about it. Plus having savings available is a great way to protect your loved ones when emergencies come up.

4 Core Differences

Now let’s take a closer look at the 4 most important differences between these two account types.

#1 What it's designed for

A checking account is designed for everyday transactions. This can include things like making purchases, paying bills, and withdrawing cash. A savings account, on the other hand, is intended to save money. It’s a place where your money sits risk-free, and it can stay there for as short or as long as you'd like.

It’s best to keep more of your money in your savings account, and have just enough in your checking account to cover your regular spending or any required account minimums. After all, you don’t want to miss out on the interest you can earn in your savings account!

#2 Interest Earned

When it comes to the differences between checking vs savings, interest is a major difference. The interest earned on a checking account is pretty small, so it’s a good idea to keep as much as you can in a savings account that earns a good interest rate.

Once you have about 6 months worth of expenses in your savings account, then it’s probably time to consider moving the additional money to other products (like stocks, bonds, mutual funds, or other long-term investment options). We’ll go into this topic later, don’t worry.

#3 Withdrawal Limits

With a checking account, there are no limitations to withdrawals. You can withdraw money at any time, however often as you’d like. With a savings account, you’re typically limited to 3-6 withdrawals a month.

#4 Fees

When it comes to fees, you can expect to find them for both checking and saving accounts. There are monthly maintenance fees for both, which can usually be waived if you meet the banks requirements, such as having a specified account balance or signing up for a direct deposit.

Checking accounts also come with overdraft fees for when you withdraw more money than you have in your account, foreign transaction fees, and an out-of-network ATM fee.

A savings account has withdrawal limit fees. So if you withdraw money more than your monthly withdrawal limit allows, you’ll be hit with a fee. Fee amounts will vary depending on the bank.


Checking and savings account are important products and we love both of them! We also recommend that you use each product for its intended purpose because we want you to get the most out of your money, so you can focus on the things that matter most to you.

Questions? Feel free to contact us if you still have questions. We’re always here for you and we're happy to help because we're in this together. Unidos.