Does the difference between a savings account and a checking account confuse you? Not sure what account suits your needs? Let us help. Before we start, here are a few key points to remember –
Checking accounts are meant for recurring usage. This account is ideal for daily transactions and lets you issue cheques against the checking account. However it offers very little interest.
Savings accounts are established to encourage less usage and are ideal for saving money over a span of time or to establish an emergency fund. These accounts charge heavily after a limited number of transactions. However, they offer larger sums of interest over the financial year.
Both accounts have multiple pros that support different needs, Here are a few key points to keep in mind before opening either account.
Account fees: An important factor to keep in mind is the fee that may be applicable when you open either account. A checking account for instance allows you to access funds at your convenience. However, some banks may impose a minimum balance for the account. This type of account permits functions like overdraft and external online transaction facilities. A savings account limits the number of transactions and only allows you to withdraw a portion of the money deposited in the account. This account limits transactions to limited banks. The account holder must transfer the funds to a checking account before withdrawing those funds. This is in order to limit access to the funds.
Interest rate: Checking accounts generally yield little to no interest. On the other hand, savings account accumulates interest. The interest rate on savings account differ between banks and depend on the time span and amount invested in the account.
Online transactions: Checking accounts are easily accessible online. They allow the account holder to make most bill payments and purchases online. Savings accounts usually do not permit these transactions. However, they allow the holder to transfer funds to a checking account in order to access these functions.
Restrictions: There are little to no restrictions on withdrawals on checking accounts. This means the account holder is free to access their account any number of times in a day or month. However, savings accounts usually restrict the holder to 3 to 6 withdrawals in a month. There are no restrictions on depositing funds into either type of account.
Availability Of debit cards: Checking accounts often come with debit cards that also act as ATM cards. This eases access to funds. Savings accounts usually do not offer the facility of debit cards. Account holders must usually conduct transactions either in person, online, or by phone.
It is possible for a person to maintain both a checking account and a savings account. While the former grants ease of access to funds, the latter encourages the account holder to save. Checking accounts are meant to help those who require frequent access to their account. Savings account offers account holders higher interest rates. They are usually used to set up a college fund or emergency fund and encourages long term investments.