When it comes to day-to-day expenses, you may be wondering whether a savings account or a checking account should be used for your expenses and saving needs. You might be surprised to learn that both have several pros and cons.
Savings accounts vs checking
The main difference between the two is that savings accounts are used to grow and save your money. Checking accounts are used for current expenses.
Savings account are better for storing your money. In most savings accounts, your money earns interest, but at the same time limits the amount you can withdraw. In most cases, the only way to access money is either from ATMs or through online transfers.
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Verify Accounts are better for spending your money. These are typically used for day-to-day expenses when shopping, buying gas, and paying your bills with no withdrawal limits. These accounts are designed to give you access to your money through checks, debit cards and digital payment. platforms like Apple Pay. Verification of accounts sometimes but usually does not allow you to earn interest.
| Characteristic | Savings accounts | Verify Accounts |
|---|---|---|
| Main use | Savings, unexpected expenses | Daily expenses |
| Interest rate | Sometimes, but minimal | Yes |
| Costs | Monthly maintenance, withdrawal limit and minimum balance fees | Monthly maintenance, out-of-network and overdraft fees (depending on the bank) |
| The minimum balance | Varied | Some banks |
| Limit transfers | Typically six per cycle | None |
Savings Account Factors to Consider
The value of high APYs (annual percentage return). Basically, the higher a bank’s APY, the more money you can make. According to Federal Deposit Insurance Corporation (FDIC), the national average APY is 0.21%. Being able to find a great bank that offers a high APY allows you to grow your savings with minimal effort. However, savings APYs have increased and some banks are now offering rates above 3% if you’re willing to shop around.
Costs. Always beware of these. Try to find an account that has no monthly maintenance fees. Some offer simple ways to give it up.
Balance requirements. Many high APY accounts require a higher balance than most. You will need to maintain the required balance each month. If you fail to maintain the amount, you may have to pay a fee. Choose an account with a balance you know you can keep.
Checking account factors to consider
No monthly maintenance fees. You will not have a balance to keep when opening a current account. No matter how much money you have in your account, no fees will be charged based on that.
New account bonuses. Some banks offer a cash bonus when you open a new checking account. According nerdwalletthese cash offers could exceed $400.
Access to ATMs. Unlike savings accounts, when you use checks, you won’t have to pay anything to use an ATM in your bank’s network.
Overdraft fees. If you spend more money than you have in your account, you will have a negative balance. For this reason, banks will charge you overdraft fees, but many banks are starting to not charge them. In some cases, a bank will cover negative charges up to a certain amount.
Which is best for you?
Savings and checking accounts both serve different purposes. Before deciding, review each bank’s fees, charges, rules, and whether they offer a bonus. Choose from what you want to prioritize. Many people use both; a checking account for day-to-day expenses and a savings account for unexpected expenses and savings. Only you know what you need from both accounts. Good luck!
#Savings #Chequing #Accounts