However, when it comes to our finances, it can feel like our list of decisions is never-ending.
Should I start saving for retirement now?
How should Ifile my taxesthis year?
Banks often charge fees for a number of services. Check out our list of thebank feesthat might show up on your account.
Do I need homeownersandflood insurance?
To make any decision about money, it helps to have all the pertinent information.
When deciding whether to open a checking or savings account, you should start by knowing how they differ.
So Whats the Difference Between Checking and Savings Accounts?
At the simplest level, customers use achecking accountfor spending money and asavings accountfor saving money.
Typically (though not always), customers open both bank accounts with the samebank or credit union.
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Savings vs.
Checking At a Glance
What Is a Checking Account?
Some premium checking accounts are billed as high interest, but watch out for the associated monthly fees.
Other common fees to consider are foreign transaction fees,overdraft feesandout-of-web link ATM fees.
What Is a Savings Account?
Unlike a checking account, a savings account is meant to let your money sit and accrue interest.
Interest rates can vary widely; in general, online banks offer higher-interest savings accounts.
Savings accounts are also insured by the FDIC or NCUA up to $250,000.
Thebest savings accountsare currently offering up to 0.60% annual percentage yield (APY).
While some banks have altered their limitations, many still cap it at six despite the legal changes.
Note:Money market accounts are not the same as savings accounts.
Ideally, you dont spend this money in the short term.
You dont invest through a savings account, nor do you save for retirement here.
Youll want to open a separate retirement account to save for the future and invest.
These accounts dont have limits on how often you’ve got the option to withdraw money.
These limits vary by banking institution and can range from a few hundred to several thousand dollars.
Federal law used to restrict withdrawals from your savings account to just six times per month.
(Withdrawing money from your savings account at an ATM or your bank did not apply.)
Fees and Deposit Requirements
Fees and minimum deposits for both checking and savings accounts vary by institution.
It is possible to finda bank that doesnt have a minimumto open an account, though.
Some banks and credit unions also charge a monthly maintenance fee for checking accounts.
There are a few other fees associated with a checking account.
Remember the aforementioned limit of six withdrawals per month for saving accounts?
Well, if you exceed that, youre charged a fee.
Online banking is the best way to ensure you get the highest interest rate for your savings account.
Checking account interest rates are notoriously low, with a national average of 0.03% as of publication.
To clarify, that means youd earn 3 cents per year on a $100 balance.
And not even all checking accounts pay interest.
There are accounts that offer interest rates that are higher than the national average known ashigh-yield checking accounts.
Online banks offer much higher APYs for their savings accounts.
Savings vs.
Checking Account: Which Should You Open?
Ideally, you would have both a checking and a savings account.
Its worth considering whether you should open both accounts with the same bank or credit union.
There are a few pros to keeping them at the same institution.
In fact, not all online banks and credit unions offer customers both types of accounts.
Your specific circumstances will affect your decision, as well.
Hopefully, youll find your perfect matches and have all the information you should probably make this financial decision.
Contributor Timothy Moore is a writer and editor in Cincinnati, Ohio.
He focuses on banks, loans and insurance for The Penny Hoarder.
Laura Grace Tarpley is a former contributor to The Penny Hoarder.
(Can you sense my millennial sarcasm there?)
You know which ones were talking about: rent, utilities, cell phone bill, insurance, groceries…
