What is the Difference Between a Checking Account and a Savings Account

What is the Difference Between a Checking Account and a Savings Account

For the Mobile Apps

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Chances are you use a smartphone, so why not let it be your personal finance hub as well. When you have a checking account, you not only have access to your account information through an online account, but most banks also provide a mobile app that will enable you to track your money, pay bills, and even split a restaurant tab with a friend.

Learning How to Budget

For most students, college life is about learning how to do more with less. It is the first opportunity to develop the invaluable habit of living under your means just to be able to stretch your fun money even more. If you are fortunate enough to carry that habit into life after college, you stand a better chance of saving for your goals and reaching financial independence more quickly.

When you open your checking account, you may be offered the opportunity to open a savings account along with it. Both are places to store your money. They are each considered to be demand accounts, meaning you have access to your money at any time, and both are insured by the Federal Deposit Insurance Corporation (FDIC). However, in managing your personal finances, they serve different purposes.

Purpose of a Checking Account

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The primary purpose of a checking account is to provide a safe store of your money while facilitating withdrawals and deposits for its use. The most common use of a checking account is for managing personal finances. Accounts can be established individually or jointly by two people. The second most common use of a checking account is for businesses worldpaydayloans.com/payday-loans-nd/riverdale/ to manage their cash flow.

Checking accounts today come with tools and resources for managing your money. Most come with a debit card which can be used for purchases or ATM withdrawals. Many banks provide online access to your account, allowing you to monitor it and to transfer money between your accounts or to other people or businesses.

Checking account users expect their money to be readily available anytime without restriction, which is why most basic accounts don’t pay any interest on deposits. However, there are checking account products which do pay interest on deposits, but there may be some restrictions on money access. People or businesses who want to have a portion of their money earning interest could also link their checking account to a savings account which would allow for any excess funds to be moved there.

Purpose of a Savings Account

The primary distinction between a checking and a savings account is that one is an interest-bearing account. Savings accounts are used primarily as a longer-term store of money that isn’t needed to meet current living expenses. Savings deposits do earn a low rate of interest. The other distinguishing feature of a savings account is the restriction on access to funds. Federal regulations limit the number of times money can be withdrawn each month to six. If more withdrawals are made, the bank could change the status of the account to a checking account without interest.

Generally, savings accounts don’t come with checks. Withdrawals have to be made in person at the bank or from an ATM using a debit card. Deposits can be made in person, transferred from a checking account, or through direct deposit from your employer.

Most bank savings accounts require a minimum deposit of between $25 and $100 and some charge a monthly maintenance fee unless a minimum balance is maintained.

Savings accounts are best utilized for accumulating sums of money needed for short-term goals, such as saving to buy a car or some other major purchase. They are also ideal for accumulating a cash reserve fund, where funds can be easily accessed for emergencies, such as a major car repair or a big medical expense.

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