Checking vs. Savings Accounts: Key Differences and Benefits

Checking vs. Savings Accounts: Key Differences and Benefits

Checking accounts and savings accounts are basic tools for helping you manage and grow your money. Both are deposit accounts, where you can deposit, store and withdraw money. But there are key differences between the two: A checking account offers you quick access to your funds for day-to-day spending and bill paying, while a savings account provides a place for accumulating and building funds toward your goals.

Each type of account has its own place in a smart money-management strategy. Used in conjunction, they can make spending, saving, budgeting and tracking easier. You can also have peace of mind depositing your money: Checking and savings accounts held at FDIC-insured banks or NCUA-insured credit unions protect deposits of up to $250,000 per depositor.

Read on to learn more about the key benefits and differences between checking and savings accounts.

Checking accounts keep funds close at hand

A checking account is an account you can deposit money into and then use for spending. Whether you’re shopping (online or in-store), dining out, paying bills or otherwise spending money, your checking account can be the payment source you access for funds, provided you have enough money in it to cover the purchase or payment.

A checking account can also be useful if you’d like to have your paychecks or other income direct deposited into your account, rather than receiving those payments by check, which you must endorse and deposit yourself. With direct deposit, you’ll have immediate access to the full amount of your paycheck on your pay day instead of waiting for a check to clear. You could even get paid up to two days early with Early Pay.*(Your employer must offer direct deposit for you to take advantage of these conveniences.)

Depending on the features of the checking account you choose, you may be able to access your funds several ways:

• Debit card - You can carry your debit card with you for in-person transactions —purchases as well as ATM withdrawals, deposits, transfers and balance monitoring. When you use your debit card to pay, the funds are immediately drawn from your checking account, so be sure to make note that those funds have been spent.
• Online and mobile banking - Online and mobile banking offers you the flexibility to manage your account(s) using your compatible device, when and where you want: view your balance and activity, transfer money between accounts, pay your bills (including setting up auto payments if you’d like) and more. This article highlights features of a good online banking and mobile app.
• Digital wallet - If you choose to use a digital wallet app such as Google Pay^TM, Apple Pay^® or Samsung Pay, you can tap with your phone to make payments in-store and make online payments from your mobile device.
• Checks - Although payments have been shifting from paper checks to digital methods over the past few decades, you can still request checks from your financial institution. They can be convenient for gift-giving or paying businesses that may not accept digital payments.

Some checking accounts are free, while others may charge fees. Checking accounts don’t typically pay interest on your balance as savings accounts do, although some, such as Dollar Bank Everything Checking, offer you the flexibility of checking plus interest earning potential. It’s important to compare checking accounts to make sure the one you choose meets your needs.

Here are some areas to compare when evaluating checking accounts:

• Monthly fees - Some financial institutions charge a monthly fee to maintain your account, but they may offer options for avoiding the fee, such as maintaining a certain balance or making a minimum number of transactions in a month.
• ATM fees - Banks generally don’t charge for you to use their in-network ATMs, but out-of-network ATM transactions are likely to trigger fees. Consider these logistics: How many times a month are you likely to use an ATM? Will an in-network ATM be accessible to you? How much will you pay for each out-of-network transaction?
• Overdraft fees - Typically, if you spend more money than you have in your account, you will be charged an overdraft fee. Fees vary, so find out your bank’s policy on overdrafts and the fees that may result. If overdrafts are of concern to you, Dollar Bank No Overdraft Checking may be a good choice.
• Other fees - Some banks may charge fees for other activity: exceeding a certain number of monthly transactions or using your debit card abroad, for example.
• Annual percentage yield (APY) - If you’re considering an interest-bearing checking account, find out how its current APY stacks up to comparable accounts.
• Account security features – The ability to easily secure your account by turning your debit card on or off, setting up real-time card activity alerts and restrictions on certain transactions are valuable features that put you in control of your account.
• Fraud alerts – Some financial institutions will alert you to suspicious activity on your account debit or ATM card, and will send you a text message with purchase details so you can easily review and reply.
• Perks - Some checking accounts offer discounts on other bank products, as well as other perks. For example, Dollar Bank Everything Checking accountholders can earn premium savings rates, mortgage and loan discounts, and access to Relationship CDs (certificates of deposit).

Savings accounts support your short- and long-term goals

A sound saving strategy can empower you to build wealth, achieve your goals and enjoy the peace of mind that comes from knowing you have a financial safety net. Savings accounts offer you a safe place to not only “park” your money but also put it to work for you. Your balance earns interest for as long as you leave it there.

Many people choose to keep multiple savings accounts: one to use as an emergency fund for unexpected home or car repairs, medical bills or other unforeseen expenses; another for short-term goals such as buying a car or making a down payment on a home; another for long-term retirement savings; etc. The key with any savings account is consistency. Build your savings goals into your budget so you remember to make regular deposits. You can also set up direct deposits from your paycheck or other income source, just as you can with a checking account.

Like checking accounts, savings accounts can be accessed with an ATM card for withdrawals, deposits and fund transfers. Your account may include online and mobile access, too.

Before opening any savings account, be sure that it fits your needs. Here are some areas to compare:

• Minimum opening balance (if any)
• Minimum balance to avoid fees
• Monthly and/or transaction fees
• ATM fees
• Transaction limits (if any)
• Annual percentage yield
• Any other requirements, such as needing to also hold a checking account with that financial institution

Need ideas for building your savings? Check out Saving Strategies for Your 20s and 30s or Saving Strategies for Your 40s and 50s.

Checking + Savings: Working hand in hand

In addition to covering your needs for everyday spending and building your savings for the short and long terms, having both checking and savings accounts at the same financial institution can add convenience and transparency to your money management efforts. You can access your connected accounts using one ATM card, online login or mobile app; easily transfer funds between accounts; track your spending and saving all in one place; and enjoy protection from checking overdraft fees with a linked savings account.

Find out more about how having reliable checking and savings accounts can help you manage your money wisely. Visit your local Dollar Bank office or call us at 1-800-242-2265.

*Early Pay is available for retail account customers in good standing who set up direct deposit with their employer or other payer to receive electronic deposits of regular periodic payments (such as salary, pension or government benefits). The timing of when a transaction is credited is based upon when the payer submits the payment instructions to Dollar Bank. Early Pay is not a guarantee that you will receive your direct deposit earlier than your scheduled pay date and Early Pay may be delayed due to unanticipated circumstances.

Google Pay™ is a trademark of Google Inc.
Apple Pay^® is a registered trademark of Apple, Inc.
Samsung Pay is a registered trademark of Samsung Electronics Co., Ltd.