The Difference Between Checking and Savings Accounts
If you’re interested in opening a checking account, you may be wondering what the difference is between a checking account and a savings account and which one you need. The truth is, there are great benefits to both. But it’s important to know what makes them different and what you can use them for before opening an account.
Both a checking and savings account can help you manage your money. But, they operate differently from one another and can make a big difference in your financial goals. Both types of accounts are typically offered by banks and credit unions.
At Arkansas Federal Credit Union, we offer both checking and savings accounts to our members.
Checking vs Savings Accounts
Checking accounts are a great tool to manage and build your finances and keep up with your spending habits. If you are considering signing up for a checking or savings account through your bank or credit union, there are some things to consider to know which one is right for you.
Understanding the difference between checking and savings accounts and how you can use them can set you up for financial success.
Usually, checking accounts are primarily used for spending and everyday activities. On the other hand, savings accounts are primarily where you save your money to use at a later date or in an emergency situation. Which do you need?
What is a Checking Account?
In simple terms, checking accounts are used for everyday payments and transactions. You will usually use your checking account for things like paying your bills, buying groceries, getting gas, shopping, and more. This is the account you will usually use for everyday spending.
The main benefit of a checking account is the easy access you have to your money. Typically, a checking account comes with checks and a debit card.
With online banking and mobile banking apps, it’s easy to manage your account. These allow you to monitor your balance, make deposits, set up automatic payments, and more.
Checking accounts may earn little to no interest and sometimes require a minimum balance to start one, but this differs depending on which bank or credit union you open a checking account with. You may also have to pay additional fees when you’re using a checking account such as overdraft fees, out-of-network ATM fees, and a monthly maintenance fee. Not all accounts have the same fee structure. So, before you open an account, learning what fees you’ll need to pay for different things is important when considering options for a checking account.
What is a Savings Account?
On the other hand, a savings account is a type of account where you are able to store and save your money that you don’t plan on spending immediately. Additionally, while you are storing your money in a savings account, you may also earn interest on the money you save.
The biggest benefit of a savings account is that you can use it to grow your money over time by setting it aside. You can use a savings account for saving up towards large purchases or taking care of unexpected expenses.
Similar to a checking account, you may have to put in a minimum balance in the account to open it and there may be certain fees associated with using your account. Again, this depends on which bank or credit union you choose to open your savings account with.
Why You Need Both Checking and Savings Accounts
If you’re wondering which account you should open, the answer is usually both.
Because checking and savings accounts serve different purposes, most people have both kinds of accounts. Checking accounts may act as a spending account but typically, you should have a small savings cushion to avoid overdraft fees. However, most personal finance experts advise you should only keep the amount you need in your checking account.
Most experts advise placing the rest of your money in a savings account after putting savings towards other personal finance goals. Savings accounts are a great opportunity to grow your financial security and help you towards bigger financial goals, like a downpayment on a home, starting a college fund, buying a new car, or other big financial commitments.
When you’re looking for a bank or credit union to open checking and savings accounts, consider looking at the different benefits, rewards, and fees that come with a new account. At Arkansas Federal Credit Union, we offer our members multiple options when it comes to checking and savings accounts.
Ready to open an account with Arkansas Federal Credit Union and become a member? If you live in Arkansas, you’re eligible to become a member and take advantage of our checking and savings accounts products. Contact us to become a member today!