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Checking vs. Savings Accounts,Which One Is Better?

Checking vs. Savings Accounts,Which One Is Better.png


Checking vs. Savings Accounts,Which One Is Better?

When it comes to managing money, you may be wondering whether a checking account or a savings account is better equipped to meet your needs. According to financial research, 5.4% of American households are unbanked, meaning no one in these families has a bank account. That’s about 7.1 million households across the country.

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Both types of bank accounts can help meet different needs for staying on top of your finances, though they don’t function in the same way.

What Is a Savings Account?

A savings account is a bank account at a retail bank. Common features include a limited number of withdrawals, a lack of cheque and linked debit card facilities, limited transfer options and the inability to be overdrawn. Traditionally, transactions on savings accounts were widely recorded in a passbook, and were sometimes called passbook savings accounts, and bank statements were not provided; however, currently such transactions are commonly recorded electronically and accessible online.

You might open a savings account to grow your emergency fund, set aside money for a vacation, build your down payment if you plan to buy a home, or save money for home improvements. Like checking accounts, you can find savings accounts offered at different financial institutions like traditional banks, online banks, and credit unions.

What Is a Checking Account?

A checking account is a deposit account held at a financial institution that allows withdrawals and deposits. Also called demand accounts or transactional accounts, checking accounts are very liquid and can be accessed using checks, automated teller machines, and electronic debits, among other methods.

Withdrawals from this account are cash withdrawals made at a branch or an automated teller machine (ATM), as well as debit card purchases, checks, money orders, ACH transfers, and wire transfers. Additionally, deposits can be made by depositing cash, checks, or money orders at a branch or an ATM, as well as via mobile check deposit, automated clearing house (ACH) transfer, or wire transfer.

Benefits of a checking account :

  • For Paying bills electronically or via check
  • Making purchases or ATM withdrawals using a linked debit card
  • Transferring money to an account at a different bank electronically

Checking accounts may or may not be interest-bearing. If it is, the money you deposit earns interest as long as it stays in your account. These accounts can be offered by brick-and-mortar banks, online banks, credit unions, and other financial institutions.

Checking and savings accounts can serve different financial purposes

  • Checking accounts are designed for everyday banking transactions and generally come with no cap on the number of transactions you can execute each month.
  • Savings accounts can help you grow your money with interest but may come with restrictions on how many times you can make withdrawals every month.
  • Consider the fees, annual percentage yield you can earn on deposits, withdrawal rules, and banking access, among the other features when you’re looking for an account.
  • Many online banks offer no- or low-fee checking accounts and better interest rates on savings accounts compared to brick-and-mortar banks.
  • Look out for rewards programs or promotions that can help you save money.

What Do You Need to Open a Checking or Savings Account?

There are several things you’ll need before you can open a bank account of any kind, whether that’s a checking or savings account. That’s because the financial institution needs to verify your identity. This means you’ll need a valid piece of government-issued identification, such as a passport or driver’s license, proof of your address, or your Social Security number. If your bank has a deposit requirement, you’ll have to bring that with you, too.

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