Checking Versus Savings Accounts

Want to learn more about your options when it comes to your money? Take a look at these differences between a checking and savings account.

There are several types of bank accounts you can open, but the two most common are checking and savings accounts.

Checking accounts are primarily used for day-to-day transactions, while savings accounts are used to store your money for a longer period of time. Since each account has a particular purpose, they function differently and offer different benefits. For example, savings accounts have a higher dividend rate than checking accounts, but checking accounts come with debit cards.

Wondering whether you need a checking or a savings account? Keep reading to discover the benefits and differences between the two, helping you make the best-informed decision for your financial needs.

What Are Checking Accounts?

Checking accounts are used to manage your daily transactions. The cash stored in your checking account is used to pay your bills, cover your living expenses, and pay for your general everyday spending.

You can deposit all (or most) of your paycheck into your checking account through direct deposit or check deposit. You can also cash checks and accept money transfers through third-party apps in your checking account.

Your checking account is designed for convenience and regular access. You can easily withdraw cash at an ATM and your checking account comes with a debit card, providing convenient access to your funds wherever you go. It’s quick and easy to write checks, transfer money to other accounts, and set up automatic bill payments from your checking account.

While A+FCU checking accounts don’t have monthly or minimum fees, it’s important to note that other financial institutions might. Overdraft fees and ATM fees are some of the extra expenses you may encounter. Additionally, unlike savings accounts, most checking accounts don’t offer dividends on your balance. Also, some checking accounts require a minimum daily balance.

With unlimited access to your funds, checking accounts make using your money and navigating your day-to-day life simple.

What Are Savings Accounts?

Savings accounts are built to store your money for an extended time frame. Unlike a checking account, you don’t use your savings account to cover your daily expenses. Instead, you use it to save money for goals – such as a down payment on a house, a vacation, college tuition, or another large purchase.

You can also use your savings account to store your emergency fund so you can prepare for future unknowns.

Since savings accounts are designed to encourage saving rather than spending, they typically have limits on how many withdrawals and transfers you can make per month. Additionally, they don’t come with debit cards.

Another way that savings accounts encourage saving is by offering dividends on your balance. Dividend rates vary by financial institution, but it’s rewarding to watch your money grow over time.

There are several ways to transfer money into your savings account. You can set up automatic transfers between your checking and savings accounts or manually transfer money from one account to another.

Some employers will agree to deposit a percentage of your paycheck into your savings account each month so that you don’t have to do it yourself. Automating your savings is a great way to build savings on autopilot.

Savings accounts may have some fees, but they’re typically lower than those associated with checking accounts. For example, you may encounter fees if you make too many withdrawals within a certain period or fail to maintain a minimum balance.

When To Use A Checking Versus Savings Account

Use a checking account when:

• Depositing you paycheck or setting up direct deposit
• Paying for your monthly bills
• Covering your daily expenses with your debit card
• Making quick withdrawals and transfers
• Paying for something with a check

Use a savings account when:

• Saving for a goal or large purchase
• Building and storing an emergency fund
• Storing money away to allow it to earn dividends

Is A Debit Card A Checking Or Savings Account?

Debit cards are associated with your checking account. They’re designed for frequent use, such as covering your groceries, gas, and other purchases. Every time you tap, insert, or swipe your debit card, the amount is subtracted from your checking account.

Every debit card purchase will then appear on your checking account transaction history. You can log into your online banking account to easily view all recent transactions you’ve made with your debit card.

When you need to withdraw cash from an ATM, you do so with your debit card, and the cash is withdrawn from your checking account.

While some financial institutions offer the ability to withdraw cash from your savings account with a debit card, savings accounts have limits on how much and how often you can make withdrawals. For that reason, most of your ATM withdrawals will come from your checking account.

Debit cards are handy financial tools that you can use every day to make purchases and access cash from your checking account.

Why Would Someone Use A Savings Account Instead Of A Checking Account?

There are several reasons why someone might use a savings account instead of a checking account. Savings accounts are typically connected to specific goals instead of daily use. Someone saving to buy a house, purchase a new car, or pay college tuition can use a savings account to collect money over time.

Another reason someone might use a savings account over a checking account is to build an emergency fund. Personal finance experts recommend having an emergency fund that’s equal to at least three to six months of living expenses. A rainy-day fund safeguards your life against unexpected events – such as a medical surgery or diagnosis, a job loss, or any major unexpected expense.

When you build an emergency fund in a savings account instead of a checking account, you won’t be tempted to use it for your daily spending. Savings accounts help you stay on track with your financial goals, and the dividends help your money grow faster.

Most people have both checking and savings accounts, allowing them to transfer money from checking to savings as they work toward their financial goals. Savings accounts help you plan for a secure financial future and offer reassurance in case of an unexpected event.

Is Money Safer In Checking Or Savings Accounts?

At a federally insured credit union, your money is safe in both checking and savings account because the accounts are protected by the National Credit Union Administration (NCUA). The NCUA protects each account for up to $250,000, which ensures that your money is safe as long as it doesn’t exceed that amount.

If your goal is to save money, it’s safer to keep it in a savings account. If your goal is to have money available to cover your purchases, it’s best kept in a checking account. However, your money is safe in both types of accounts at a federally insured credit union.

When considering a checking versus savings account, keep your specific needs and the benefits of each option in mind. Both types of accounts help build an effective financial plan. When you have both a checking and savings account, you can cover your regular expenses while setting money aside for the future and allowing it to earn dividends.

Achieve Your Financial Goals With Checking & Savings Accounts At A+FCU

At A+FCU, we offer a variety of options for checking and savings accounts. Our robust financial services make it easy to choose the best type of account for your needs. Whether you need a checking account to manage your day-to-day transactions or you want to save for a rainy day, we can help you set up the right accounts.

A+FCU is an award-winning Texas credit union that’s dedicated to helping people meet their financial goals. Take advantage of our checking and savings accounts that can take you one step closer to financial freedom.

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