Checking vs Savings
Have you ever considered the difference between the two most common bank accounts - checking and savings?
What are the differences between a checking account and a savings account?
A checking account is a transaction account and is designed for everyday money needs. There are no limitations on how many times you can withdraw money from your account. Funds may be withdrawn using a check, debit card or by other electronic means like online billpay or pre-authorized electronic fund transfers.
A savings account is intended to hold funds and earn interest for future needs. There are no limitations on how many times you can deposit funds to a savings account, but government regulations and banking agreements limit how often you can withdraw funds from an account without penalty. This includes in person withdrawals, all forms of electronic withdrawals, and transfers.
The money in your savings account is always your money. Still, if you withdraw more than the number of times stated in the account terms and conditions, you may be charged a penalty and in some cases your account could be closed per government regulation requirements.
How do I decide what account is best for my needs?
When opening an account, it is important to consider your primary use for the account. You might use a savings account to build an emergency fund, save for vacation, a car, or annual payments like insurance premiums.
You might use a checking account to pay bills online, purchase fuel for your car, buy groceries, make Paypal or Ebay purchases, as well as pay for that daily coffee or sweet tea.
Can I have more than one type of the same account at the same bank?
Yes. Having multiple accounts at the same bank can be useful in organizing your finances. You may have one checking account to pay your monthly bills and basic expenses. You may open another checking account to strictly use for online purchases. Limit the balance in the account for an added layer of security if the account were to be compromised online.
You may have one savings account that is only used for emergencies and another where funds are saved for a vehicle, house down payment, or vacation.
Discuss your needs with your banker to ensure the account you are opening is the best fit. Ask questions to understand the terms of the account and limit any surprises regarding transaction limitations or fees.