Arizona Tribune - How Do You Know If You Should Open a Checking or Savings Account?

Most people use both accounts to meet different goals for their overall financial strategy. Discover the features and benefits of checking vs. savings accounts below and find the right fit.

What is a checking account?

A checking account is an easy-to-access bank account ideal for daily activities like cash withdrawals, money transfers, debit card purchases and writing checks. Most checking accounts offer tools like a debit/ATM card, checkbook, mobile banking account and digital payment wallet to help you access your finances anytime and anywhere. These accounts are designed to maximize spending convenience. Most people use them to pay bills or for day-to-day purchases like groceries, gas, dining or shopping.

Checking accounts don't typically earn interest. Even if you find an interest-earning checking account, it's likely to earn less interest than a savings account. Additionally, you may need to maintain a minimum balance to avoid account maintenance fees (depending on your bank).

What is a savings account?

Savings accounts can help you save and grow your money over time. Unlike checking accounts, these accounts attract interest over time and can help you attain financial goals such as saving for a down payment or a car. Many people also keep their emergency money in a savings account so that the money is accessible when they need it but otherwise unlikely to be spent.

While earning interest sounds lucrative, savings accounts cannot replace checking accounts altogether. Banks often limit how many withdrawals you can make from a savings account and may charge you a fee if you exceed the limit. As with checking accounts, you may have to pay monthly maintenance fees if you can't maintain the required minimum balance.

How to make the right choice

Before you open your account, reflect on what your needs are and what goals you're hoping to achieve.

Checking account: Open a checking account if you're looking for an account you can use for daily transactions like bill payments, purchases and money transfers. A checking account offers access to an ATM/debit card, so you can easily withdraw money or make online (and in-person) purchases at your convenience. Checking accounts are also great for day traders who may buy or sell assets throughout the day, as well as small business owners or solopreneurs who may need to make frequent payments to vendors, suppliers and part-time or contract employees.

Savings account: Get a savings account if your goal is to save money instead of spending it. Set aside small amounts in the account each month and watch your money grow over time as it earns compounding interest. Use a savings account for short-terms goals like home repairs or your next vacation. Alternatively, park your emergency money in a savings account so you don't run the risk of spending it accidentally.

Disclaimer: Article content is intended for information only. It may not reflect the publisher nor employees' views. Consult a financial professional before making financial decisions. Publishers or platforms may be compensated for access to third party websites.

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SOURCE: iQuanti

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