Checking versus savings accounts: Key differences and strategies to make the most of your bank accounts

Whether you’re opening your first bank account or reviewing the accounts you’ve had for decades, these questions may arise: What are the differences between a checking account and a savings account? What account should you use and when?

• Checking accounts work like digital wallets and are most often used for making daily purchases, paying bills, and depositing earnings. Consider opening a checking account if you need frequent access to your money.
• Savings accounts work like digital piggy banks and are most often used for setting aside money for emergencies, large purchases, or growing funds over time. Consider opening a traditional savings account if you need a tool to keep money to cover unexpected costs or to accomplish a financial goal.

How you use your bank accounts is up to you. But it’s important to remember these two types of accounts will come with features to make certain financial strategies and decisions easier or harder, faster or slower, or cheaper or pricier.

For example, checking accounts traditionally come with debit card access to make purchases easy, whereas savings accounts offer higher long-term earning potential. It’s worth considering these features when deciding how to manage your money.

“Checking and savings accounts are tools you can rely on for the long haul. Together, they give you what you may need to handle the core parts of your financial life: spending, budgeting, and building consistent saving habits,” said Chris Starr, Wells Fargo’s head of deposits.

Here are the major differences between checking and savings accounts at a glance.

Checking accounts are often used as your primary daily use bank account where your money comes in and out from. That’s why it’s called a checking account: Checking accounts were the accounts people used to write checks. Today, while check writing is less common, checking accounts are where many deposit their checks, wages, and other earnings, often through direct deposit. In fact, they’re often called transaction accounts in other parts of the world.

You can think of your checking account as a launch pad, a place where your money comes in as you decide to move funds elsewhere by spending, saving, or investing.

Typical checking account features

• Debit card access, allowing account owners to spend money from their account in stores or online
• ATM access, typically by using a debit card
• Online banking and account management tools
• Transaction support, including the ability to set up direct deposit, bill pay, and no or fewer limits to transactions with the account

How to use a checking account

• Depositing paychecks or earnings, usually by setting up direct deposit in the case of regular wages or government benefits
• Making regular transactions like paying rent, utilities, or other bills
• Paying friends, family, or others, typically through a person-to-person payments tool like Zelle®¹ or a check
• Putting money into savings, such as an automated or manual transfer into a savings or investment account

Checking accounts aren’t effective savings tools because they don’t typically feature an interest rate to build up funds over time unlike other tools designed around short-term or long-term saving or investing. And because they’re designed around easy access to your funds and moving money around, some may find checking accounts harder to use to build up savings and stay on track with savings goals compared to other kinds of accounts.

What fees can come with checking accounts?

Depending on your financial institution and the features of your checking account, you may incur fees including:

• Monthly or maintenance fees: For checking accounts, these fees are typically waived if you meet certain requirements, such as a minimum account balance or if you’ve set up direct deposit.
• Overdraft fees: This fee, which refers to when your account balance goes below $0, may be waived, reduced, or have other restrictions for some accounts. Some checking accounts may not allow you to overdraft altogether.
• Transaction or service-based fees: Your bank may charge a fee for sending cashier’s checks or money orders, when you use an out-of-network ATM, or when you make foreign transactions.

A savings account is a bank account where you store money, either for a short amount of time or a long one. This can help you save funds for a large purchase or occasion — like a gift, car, wedding, or home down payment — help you build wealth, or reach your financial goals. Financial institutions incentivize savings account users to store their money in these accounts by paying interest on their account balance.

While a checking account is typically the primary bank account you’ll use for depositing funds and making transactions, your savings account may be secondary, a place where you move money to. Compared to checking accounts, savings accounts are usually better tools to grow your savings and build wealth because they typically come with a higher interest rate and are designed to keep a balance.

The tradeoff for this higher interest rate is typically less accessibility to those funds. Savings accounts may have lower limits to how often or how much money you can take out or make transactions compared to checking accounts.

Typical traditional savings account features

• Earning interest: This is the amount of money your savings account will accrue over time, typically represented by a standard interest rate and an annual percentage yield (APY), and deposited into your savings account monthly.
• Withdrawal and transaction limits
• Online banking and account management tools
• Debit card and ATM access, though these features are less likely than with checking accounts. Some savings accounts can be accessed by an ATM if linked to a checking account and debit card.

How to use a savings account

• Save money: For example, you can set aside an emergency fund to pay for unexpected expenses or cover your expenses if you’ve lost your income. A good rule to follow is that your emergency fund should cover three to six months’ worth of expenses, though any amount you set aside helps.
• Earn a return through an interest rate set by your financial institution. For example, if you have $10,000 in your savings account at the start of the year and your account earns a .02% interest rate, you’ll earn $2 by year’s end.

What fees can come with savings accounts?

Depending on your financial institution and the features of your traditional savings account, you may incur fees like:

• Monthly or maintenance fees: For savings accounts, these fees are typically waived if you meet certain requirements, such as a minimum account balance or if you’ve set up automated or recurring payments from another account.
• Stop payment fees: This fee may be charged if you stop or cancel an automated or recurring payment you’ve made with the account, like if you were paying a bill
• Transaction fees: Just like with checking accounts, your bank may charge a fee for sending cashier’s checks or money orders, when you use an out-of-network ATM, or when you make foreign transactions using your savings account
• Overdraft fees

Other kinds of accounts for saving money

Beyond traditional savings accounts, there are a variety of similar deposit accounts geared toward saving and growing money over time, such as:

• Certificates of deposit (CDs): These accounts, also referred to as time accounts, require an upfront deposit and guarantee a return based on a fixed interest rate over a term, or a set time period from a few months to several years. CDs typically pay higher interest rates than other products like checking and savings accounts. With CDs, you may have to pay a fee to withdraw funds.
• High-yield savings accounts (HYSA): These accounts typically earn greater returns thanks to a higher interest rate — though, unlike many traditional savings accounts, this rate may fluctuate over time — but money in these accounts may be less accessible, requiring more time to withdraw compared to a standard savings account. HYSAs may require an initial deposit to open.
• Money market accounts (MMA): These bank accounts blend features of both checking and savings accounts. They typically bear interest, meaning you’ll earn a return over time, but they may also feature access to a debit card and/or checks.

The pros and cons of checking and savings accounts illustrate how these two kinds of accounts can work together. Data suggests that using a variety of accounts is a strategy for many people. The average American has 5.3 transaction accounts (PDF) — checking, savings, money market, and other accounts — according to a 2019 FDIC survey. Access to these tools is nearly universal: 94% of American households have access to a bank account, according to the Federal Reserve (PDF).

Depending on your situation, you may consider other ways of taking advantage of checking accounts and savings accounts.

• For couples: Do you want to manage finances or make joint financial decisions with a partner or spouse? Both checking and savings accounts allow you to have a joint account holder, though many couples may opt to have both individual accounts and joint accounts.
• For parents: If you’re a parent looking to help your child start banking, you may consider checking or savings accounts that offer unique benefits for teenagers and young adults. Whether your child is earning money through a summer job or receiving an allowance, you can use these bank accounts as tools for passing on financial values or habits.
• Don’t have a bank account? If you’re part of the 5.6 million U.S. households without access to a checking or savings account identified by the FDIC, being unbanked could be costing you money over time if you end up relying on alternative financial services that carry higher costs and/or higher risks.