A savings account or a checking account? Which would you pick? If you’ve been plagued by this question, you’re in the right place. The basic difference between both accounts is related to the extent to which you can extract money from your account. If you are someone who is looking forward to limiting your expenses and storing some part of the money for the future, a savings account might be the ideal account for you. Savings accounts provide attractive interests on the amount. Their prime purpose is saving money, hence, your access to money will be limited to only a few times a month.
The basic difference between both accounts is related to the extent to which you can extract money from your account. If you are someone who is looking forward to limiting your expenses and storing some part of the money for the future, a savings account might be the ideal account for you. Savings accounts provide attractive interests on the amount. Their prime purpose is saving money, hence, your access to money will be limited to only a few times a month.
A checking account is an account that is suitable for basic day-to-day transactions. There is no limit to the number of withdrawals, and you can easily pay your bills, transfer money, make purchases, etc. This account has low interest or no interest rate.
Savings account: The in-depth analysis
As mentioned, this account is here to grow your money through high-interest rates. Some banks limit transactions and withdrawals 6 times a month, which can also be considered a standard cap.
The downside to this type of account is that you cannot transfer or withdraw money as you please. If you still proceed to withdraw, repercussions will be there in the form of an extra fee or your account being converted to a checking account.
Although the FDIC announced that banks are now allowed to lift their limit of 6 times a month, you still need to check in with your bank and ensure that it is allowed. If not, you might incur a penalty unknowingly.
Checking account: The in-depth analysis
These accounts basically are transaction or spending money accounts. They offer debit cards and checks for making spontaneous transactions. These accounts don’t pay a lot of interest, so if you are looking to save money, best keep it in your savings account.
The best checking accounts provide you with sign-up bonuses, zero monthly fees, and a network to nationwide ATMs for easy withdrawals. These accounts will make paying everyday bills easier, and help you maintain liquidity without any limitations. The prime goal is to hold your money in a secure place until you withdraw it.
Rate of high APYs on savings account
Checking accounts are subjected to an average APY of up to 0.03%, while savings accounts entail an average APY of 0.06%. You will be astounded to know that some banks and credit unions provide 20 times more than the average interest.
High-interest rate means more money grows over time. For example, if you deposit $6000 in an account with a rate of 0.10%, this rate will get you over $6 in a year. On the other hand, if a bank is providing 1% interest, then the same amount will get you $60 in a year.
There are several financial instruments where you can deposit money and grow your money over time. If you have large sums of the amount that you don’t want to withdraw over a long time. A certificate of Deposit is also one such alternative that provides a better rate with a guarantee.
If the bank fails, will your money be gone?
Banks are insured with up to $250,000 for each depositor. This insurance is given by the Federal Deposit Insurance Corp. In case, the bank fails, you would still have your money up to the amount that is mentioned above.
Credit unions are insured by the National Credit Union Administration. In the same way, if a credit union fails, you will not lose your money up to the insured amount.
Should I open a checking and savings account at the same bank?
Conjoining both accounts at the same credit union provides convenience over the transfer and withdrawal of money from one account to another. Some banks also provide appealing options like waiving the transaction fee on linking both accounts.
Not every bank will provide you with both savings and checking accounts with good benefits. To explain it in simple words, if a bank is providing good interest on the savings account, it is most likely that they are not providing interest rates on checking accounts.
The best choice always depends on how much you are planning to grow your money and save extra. You should look for banks that provide attractive interest rates on the savings account. You should also look for zero or fewer service fees for checking accounts. It is advisable to open your accounts in banks that provide high-yield savings accounts. You can have a current account and a savings account in a bank. Then open another one in a bank with competitive rates. Though do maintain the balance requirement in all banks to avoid penalties.