The core difference: how you use the money

A checking account is built for spending. You get a debit card and checks, you can withdraw money as often as you want, and there are no limits on how many times you move money out each month. A savings account is built for holding money. You can still withdraw it, but the account is designed to discourage frequent withdrawals — the bank pays you interest (a small amount of money) for letting them hold your cash.

Think of a checking account as your working pocket. Think of a savings account as a jar you keep on a shelf. You reach into your pocket constantly. You reach into the jar only when you need to, because the longer money sits there, the more it grows.

Most people use both. You get paid into checking, spend from checking, and move extra money to savings so it earns interest and stays separate from your daily spending.

Key Takeaways

  • Checking accounts have unlimited withdrawals and are designed for frequent spending; savings accounts limit how often you can withdraw and pay you interest on your balance.
  • Banks charge monthly fees for checking accounts more often than for savings accounts, but many checking accounts waive fees if you keep a minimum balance or set up direct deposit.
  • Savings accounts earn interest — a percentage of your balance that the bank pays you — while checking accounts typically earn little or no interest.
  • You can have multiple savings accounts at the same bank to separate money for different goals, but you typically need only one checking account for daily spending.

How often you can take money out

With a checking account, you can withdraw money as many times as you want in a month. You can use the debit card five times a day if you need to. There is no penalty, no limit, no waiting period.

With a savings account, federal rules used to limit you to six withdrawals per month. Those rules changed in 2020, but many banks still keep their own limits — often six or ten per month. If you go over the limit, the bank may charge a fee or convert your account to a checking account. Some banks have removed the limit entirely, but you should ask your bank what their rule is before you open a savings account.

This is why savings accounts work best for money you are not touching regularly. If you need to pull money out constantly, a checking account is the right tool.

Interest: the money the bank pays you

Interest is money the bank pays you for letting them use your cash. If you keep $1,000 in a savings account that earns 4% interest per year, the bank will add about $40 to your account over twelve months (the exact amount depends on how the bank calculates it). Checking accounts almost never earn interest, or earn so little it rounds to zero.

The interest rate changes based on what the Federal Reserve does with national interest rates. When rates are high, savings accounts pay more. When rates are low, they pay less. Right now, rates vary widely — some banks pay 4% or higher on savings accounts, while others pay less than 1%. It is worth comparing what different banks offer.

Interest is one reason to keep extra money in savings instead of checking. Over time, even a small rate adds up, especially if you are not spending the money anyway.

Monthly fees and how to avoid them

Banks charge a monthly fee for checking accounts more often than for savings accounts. A checking account fee might be $10 to $15 per month, though many banks waive it if you meet certain conditions.

Common ways to avoid a checking account fee are: keeping a minimum balance (often $500 to $1,500, depending on the bank), setting up direct deposit of your paycheck, or maintaining a certain number of debit card transactions per month. Some banks waive fees for customers over 55 or under 25. Ask your bank what their fee is and what waives it before you open the account.

Savings accounts usually have no monthly fee, or the fee is waived much more easily. Some banks charge a fee only if your balance drops below a certain amount, like $100.

Which account to use for what

Use your checking account for money you spend regularly: rent, groceries, gas, bills, everyday purchases. This is where your paycheck lands, and this is where you pull from to pay for things.

Use your savings account for money you want to keep separate and grow: an emergency fund, money for a goal three months or more away, or money you are saving for a large purchase. The interest helps it grow slowly, and the withdrawal limit (if your bank has one) keeps you from dipping into it on impulse.

Many people keep one checking account and one or more savings accounts. You might have a savings account for emergencies, another for a vacation, and another for a car down payment. Each one earns interest and stays separate from your spending money.

Debit cards, checks, and how you access the money

Checking accounts come with a debit card — a card that looks like a credit card but pulls money directly from your account. You can swipe it at a store, use it online, or insert it at an ATM to withdraw cash. Most checking accounts also come with a checkbook, though fewer people use checks now.

Savings accounts do not usually come with a debit card. You can withdraw money by going into the bank branch, using an ATM (if your bank has one), or transferring money online to your checking account. Some banks offer savings debit cards, but they are less common.

This is another reason checking is for spending and savings is for holding: checking gives you quick, straightforward access to your money whenever you need it.

Opening both accounts at the same bank

Most banks let you open a checking account and a savings account at the same time, and you can link them together. This makes it straightforward to move money between them online. You might transfer money from checking to savings every payday, or move money back to checking if you need it for an unexpected expense.

You do not have to use the same bank for both. Some people keep checking at one bank because it has more ATMs near their home or work, and savings at another bank because it pays higher interest. Just keep track of which bank holds which account, and remember that transfers between different banks take one to three business days.

Frequently Asked Questions

Can I use a savings account like a checking account?

Technically yes, but it is not ideal. If your bank has a withdrawal limit and you go over it, you will pay a fee. If you do not have a debit card for the savings account, you cannot spend directly from it. Savings accounts are designed to discourage frequent use, so the fees and limits will frustrate you if you are spending regularly.

Do I need both accounts?

Most people find both useful, but you can start with just a checking account. Once you have money left over after paying bills, opening a savings account lets that money earn interest instead of sitting idle in checking. You can open a savings account anytime.

What happens if I overdraft my checking account?

If you try to spend more than you have, the bank may decline the transaction, or it may allow the transaction and charge you an overdraft fee (usually $25 to $35). Some banks link your savings account to your checking account so money transfers automatically if you overdraft, avoiding the fee. Ask your bank about this option.

Why does my savings account earn so little interest?

Interest rates change based on what the Federal Reserve does nationally. When the Fed raises rates, banks eventually raise what they pay on savings. When the Fed lowers rates, banks lower their rates too. Right now, some banks pay much more than others, so it is worth shopping around and comparing rates before you open an account.

Can I have multiple savings accounts?

Yes. Many people open separate savings accounts for different goals — one for emergencies, one for a vacation, one for a car. Each account earns interest separately, and keeping them at different banks (or with different names at the same bank) helps you avoid accidentally spending money meant for a specific goal.