Checking vs Savings Account: Which is Best to Hold Your Money?

Checking vs Savings Account Which is Best to Hold Your Money, June 2021

Opening a bank account is one of the first steps you take to begin your financial life and many people including myself still have accounts from our childhood.

These decisions were usually made for us by our parents and we didn’t know much in the way of finances at 12 years old. Surprisingly, almost a quarter of all Americans don’t have a bank account or are not using traditional financial services. 

For those who need to catch up and are looking to open a new account for themselves or maybe their children, it is important to know the differences between the types of accounts and the pros and cons of each.

Making informed and educated decisions is critically important, especially when it comes to your finances so let’s cover all the bases and break it all down. 

What Are Checking Accounts?

These accounts are designed to be used for deposits and withdrawals, daily if necessary. Checking accounts offer debit cards and check-writing capabilities as well as cash withdrawals from branches or ATMs.

Checking accounts are an all-purpose financial account for moving and using money on a daily basis.

These accounts may or may not accrue interest on the account balance depending on your bank and account type.

A checking account is widely available and is offered by bank branch locations, online banks, and credit unions.

When searching for different types of checking accounts be sure to compare a few metrics to be sure you are getting the best deal.

You should be looking for the cheapest fees for transferring money and using your debit card, any annual percentage yields that can be earned, transaction and withdrawal limits, and ATM and branch access points.  


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    Needing to pay bills which can be done at the bank branch, electronically, or by check.
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    Making daily purchases or ATM withdrawals using the linked debit card. Many accounts have limited transactions per month but also offer unlimited transactions at a monthly fee. It becomes worth the money if you use your card at least once a day.
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    Transferring money to other accounts electronically. Many banks offer apps, and Web services to help you send and receive currency between accounts.

What Are Savings Accounts?

Savings accounts are designed to be used for holding funds that are not designated for immediate use such as bills and spending money.

These types of accounts are great for things such as setting up an emergency fund, vacation money, down payments, or any other savings goal you may have.

Savings accounts are offered in nearly just as many places as checking accounts are such as bank branches, and online banks. 

In contrast to checking accounts, savings accounts usually have a higher annual percentage yield but are far more limited in usability. 

These interest rates are in place to incentivize people into depositing their money into a bank.

The average savings rate as of Jan 2021 was 0.5%. It may not seem like all that much and if you are not satisfied by that, then online banks offer nearly 20 times higher APY on savings accounts than what a checking account might offer you.

Online banks can offer a higher interest rate due to significantly reduced overhead costs such as not having physical locations. It is not unusual to see interest rates ranging from 1.9% to 2.25% within these online savings accounts. 


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    The high annual percentage yield on a savings account is ideal for putting money away for a specific purpose without the risk of investing it and losing it. Popular goals include tuition funds, buying a car, house down-payment, and everything in-between that requires a couple of paychecks.
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    Linking your savings account with your payroll is a great way to set aside a portion of your earnings. You can have an employer automatically deposit a certain amount into your savings account every deposit and in such a way accumulate significant savings without any effort.


In contrast to checking accounts which can have unlimited numbers of transactions, savings accounts are far more restricted due to “Regulation D’. This is a regulation by the Federal Reserve Board that limits the amount of savings account transactions to no more than 6.

Violating this rule can lead to excessive fees and even the loss of your interest rate on the account! Savings accounts, share savings accounts, and money market accounts are limited by this Regulation.

Transactions that count against the 6 uses include; ACH withdrawal, overdraft transfers from savings to checking, and debit card transactions. In-person withdrawals are unlimited when done at the branch, or ATM. 


Both checking accounts and savings accounts are perfect for each of their respective roles. We would even say that most people should make use of both types of accounts.

In many cases, banks actually offer joint checking and savings accounts to have all of your funds in the same place.

Before deciding on which account type is right for your current needs let’s go over a couple of points of comparison to make your hunt a little simpler. 

When comparing any account, checking, or savings, be sure to take a close look at the fees associated with owning and using said account. For example, many checking accounts will have a monthly charge or a minimum balance if you want to have unlimited transactions. 

Minimum balance requirements can be a real shock if you were to suddenly fall below them due to an emergency and get charged large monthly fees for failing to meet the required minimum balances.

Additionally, being aware of the spending, transfer, and transaction limits will save you a lot of headaches when choosing an account.

Take note of the annual percentage yield offered on savings accounts and some checking accounts. Remember online banks and credit unions typically have more competitive interest rates but are slightly more inconvenient to use. 

Banks typically have promotional offers for opening new accounts due to the very competitive nature of the business. Take note of what each bank offers as some promotions can be game-changers for you. 

Lastly, be sure that you will have easy and convenient access to your money. The last thing you want is to have a hard time accessing your own funds.

Be aware of the branch locations and which ATMs offer free withdrawals for your specific banks. Some banks have great rates but nearly nowhere to withdraw your money from! 


Nearly every major bank and their subsequent services will offer both a checking and savings account when you open a new card, but it's still crucial to know how these accounts differ.

Likewise, it's important to understand interest rates, transferring, and withdrawal/spending uses. If it's your first time opening a bank account or your 20th, it never hurts to do your research when it comes to financial services.

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