Checking vs savings account – which one do you need?
Last updated on June 30, 2020
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I think you will agree that the United States is increasingly moving towards a cashless society.
Recent research has found that this is true.
The payment processor TSYS determined this in 2018 Only 14% of respondents prefer cash as a payment method.
In order to operate successfully in today's financial world, you need a bank account.
This article will help you decide between a Check against savings account.
Banking – indispensable in today's world
It may still be possible to be a money freak and live your life with a bunch of greenbacks in your pocket, but it is becoming increasingly difficult to do so. We can see this in the decline in the number of US households without a bank account.
In 2000, approximately 10 million US households had no bank account. Today despite the The number of households rose from 105 million at the turn of the century to more than 128 million in 2018 (statista.com)The number of households without a bank account is less than 8.5 million (FDIC National Survey of Unbanked and Underbanked Households). That is only about six out of 100 households who do not benefit from at least one bank account.
If you do not have a bank account, you are in a decreasing minority. And it's easy to understand why. Relying on cash makes your life a lot more difficult. Without a bank account you need to:
- Agree to pay bills in cash
- Take time out of your busy life to visit and pay suppliers
- Rely on other bills to pay for you
You will also find it more difficult to get credit. That could make your life very challenging. For example, without a bank account, you need to develop a strategy Get an apartment with no credit rating if you want to move to your own place.
It is also becoming more difficult to buy goods and services without a bank account. Customers are being turned away from more and more shops and restaurants if they cannot pay with plastic. Companies become cashless. These include large companies like Dos Toros and Starbucks Experiment with cashless transactions.
If you carry cash with you, you are also open to theft. If your bank card is stolen or cheated, you can use your card provider to reclaim the money that was stolen from you. But once the money is gone, it's gone.
And if someone has to send you money and you don't have a bank account, you can't use facilities like Cell. Without a bank account, you rely on money orders or cash – and who wants to send by post?
Someone used cell You can transfer money from your bank account to your account within seconds – free of charge. If you have a linked bank account cell (and most banks are today) it is easy to transfer and receive money. You can pay your bills and send money to loved ones with just a few clicks of the mouse.
Checking the Vs Savings Account – What Do You Need?
What type of bank account you need depends on how you plan to use it:
- A checking account is designed for everyday use – to carry out all your normal transactions. You can withdraw cash from ATMs, pay for large and small purchases with your debit card and pay bills electronically.
- A saving account is designed as a place where you can keep your money and earn interest on it. Access to your money is limited, as is the number of transactions you can perform through a savings account.
What is a checking account?
A checking account is your spending account. Your employer is likely to pay your wages to your checking account and it is ideal to carry out all of your financial transactions.
There is no limit to the number of transactions you can perform, and you can do them in several ways. You can choose to pay by check or debit card, or pay regular bills such as ancillary costs by direct debit.
Some checking accounts pay a small amount of interest on positive balances, and you may be able to set up an overdraft facility to simplify budgeting for financial emergencies.
Most checking accounts have no monthly feesand they offer free access to ATMs across the country and internationally. If you dive into your overdrafts or withdraw at an ATM that is not part of the bank's network, fees will apply.
You have access to online and mobile banking. In this way you can manage your finances, deposit checks by scanning them on your mobile phone and view your credit online at any time.
What about a savings account?
Unlike a checking account, you cannot make daily transactions from your savings account. In fact, you can only make six transactions a month. However, if you go to the branch in person, you may be able to do more transactions.
As a reward for this restricted access, you will receive interest on your savings account balance. However, you have to look around since interest rates vary between banks.
There is a limit on how much you can withdraw from your savings account. If you want to withdraw more, you may have to pay a fee.
You can deposit money into your savings account in a number of ways, but most often through direct deposit – usually from a linked checking account. You have branch and ATM access (like a checking account) and can manage your account electronically in the same way as a checking account.
As with a checking account, you can use a payment app like Cell to transfer money to your savings account.
What if the bank goes down? Will my money disappear?
The fear of bank failures is natural, especially after the banking crisis that started in 2007 and prompted taxpayers to support several of the largest financial institutions in the United States. So you may fear that if your bank collapses, your money will disappear into a black hole caused by the bank's bankruptcy.
Rest assured, your money is protected. Your bank deposits are insured by the Federal Deposit Insurance Corporation. But it is important to know how much is protected and how …
Up to $ 250,000 of your bank account balance will be insured by the FDIC if the bank goes bankrupt. This is per depositor and per institution. So if you saved $ 250,000 at one bank and another $ 250,000 at another bank, the entire $ 500,000 is protected – depending on the two banks not operating under the same financial institution.
Checking the Vs Savings Account – What Do You Need?
The type of bank account you need and the choice between a check and a savings account depend on how you manage your finances and how you spend your money.
A checking account is ideal if you want to deposit your paycheck and manage your daily transactions.
If you own or rent your home, you can have your mortgage or rental payments paid directly from your account. You can also arrange for other regular bills to be paid when due. This frees you from manual payments and ensures that you never miss a payment again – say goodbye to late fees.
A checking account is also supplied with a debit card. You don't have to check whether a restaurant takes cash before you sit down to eat.
A checking account makes daily financial management easier for you, but it is certainly not the best place to keep your savings:
- First, the ease of access eases temptation
- Second, large deposits are big targets for fraudsters and thieves
- Third, your savings don't deserve the interest they could if you kept them in a checking account
Therefore, you will probably need a savings account for your emergency fund, larger cash deposits, and regular cash savings.
Checking the Vs Savings Account – Finding the Best For You
If you are looking for the best checking accounts and savings accounts, you should look for those with high interest rates and low fees. Accounts free of charge are often the best for most people because maintenance fees can cost more than you earn on interest.
If you choose to have both a checking account and a savings account with the same bank, this can be your decision financial life a little easier. It is easier to transfer cash between your accounts, and monthly fees can be waived if you link accounts with the same bank.
However, it is unlikely that you will find the best conditions for checking accounts and interest rates for savings accounts at the same bank. So it may be best to open accounts with different banks – and then use them cell to make instant transfers when you need them.