A checking account offers convenient access to your money, while a savings account often earns interest while also keeping your money close at hand.
Sometimes bank accounts look all the same. But savings accounts and checking accounts have very different functions, while both are part of a healthy financial life.
A checking account is offered by banks, credit unions and other financial institutions. Checking accounts let you deposit and store money in a safe, secure place and access it easily.
A checking account also helps you manage your day to day finances, like making purchases and paying bills. They also typically have no limit on the number of transactions you can make every month. They’re designed to let you access your money anytime you like.
The central feature of checking accounts is a checkbook, with checks you can write to pay bills or transfer funds to friends and family. Most supply a debit card as well, which you can use for purchases and to access your money as cash at ATMs.
Another common feature is auto-pay, which allows you to pay recurring bills, like utilities or rent payments, every month. Some banks and financial institutions offer overdraft protection too, where you’re given a grace period when your balance reaches zero, often before applying penalties.
Some checking accounts pay interest on your balance, although not all, and almost all checking accounts are FDIC-insured up to $250,000.
Always check the features, fees and FDIC status when opening a checking account. Consider how you usually use money and find an account that fits your needs.
A savings account can help you grow your money, while keeping it safe and close at hand. Savings accounts typically pay interest on your deposits, and while some limit the number of withdrawals each month, some provide unlimited access.
Most savings accounts are also FDIC-insured up to $250,000. However, keep in mind that limit covers the total of your deposits in both your checking and savings accounts at a single financial institution.
Most Americans have both a checking account and savings account. Most of us use our checking account for everyday spending and transactions, and use our savings account for reserve funds to keep close at hand and to save for large expenses in the future. If a checking account runs low, funds can be quickly transferred from a savings account.
Financial planning with Bright.
Here are a few questions to ask when opening any account:
1. Is there a minimum deposit and minimum balance requirement?
2. Are there monthly or annual fees?
3. Does the account offer a debit card or check writing features?
4. What is the interest rate or APY offered?
5. Are there any transaction fees, for deposits, withdrawals or other transfers?
Finally, make sure that the financial institution offers the access you need. This can include convenient branches or ATMS, easy online banking or a mobile app compatible with your devices with features you want to use.
Bright can build your savings faster than most people can on their own. Week by week, Bright moves funds from your checking account to your Bright savings account -- so you’re saving more regularly and reaching your goals faster.
With Bright, you can also set up personalized saving pockets -- like a wedding, a vacation or a new car -- to help focus your efforts.
Bright connects to and works with your bank’s checking account, studying your income and spending habits and withdrawing funds to pay off your credit cards fast. Bright’s MoneyScience™ AI also ensures the app never takes too much, so you always have enough for upcoming bills and expenses.
If you don’t have it yet, download the Bright app from the App Store or Google Play. Connect your bank and your cards, set a few goals and let Bright get to work!
With a postgraduate degree in commerce from The University of Sydney, Pranay has his finger on the pulse of the finance industry. Breaking down complex financial concepts is his forte.