Distinguishing Between Checking and Savings Accounts

Differentiating Checking Accounts from Savings Accounts

While both checking and savings accounts offer a safe and secure place to store your money, it’s important to understand their differences. Generally, checking accounts are suitable for everyday expenses such as bill payments and ATM withdrawals, while savings accounts are better used for keeping your funds safe and growing your money. Savings accounts typically earn more interest, but may also have restrictions, like a monthly limit on the number of times you can withdraw money without being charged a fee.

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SoFi Checking and Savings

With a SoFi membership and direct deposit, you can earn up to 4.30% annual percentage yield (APY) on savings balances (including Vaults) and 1.20% APY on checking account balances. There is no minimum direct deposit required to qualify for the high APY for savings. If you don't have direct deposit, you can still earn 1.20% APY on all account balances in checking and savings (including Vaults). Interest rates are variable and subject to change at any time. As of 06/09/2023, these rates are current. For more information, visit http://www.sofi.com/legal/banking-rate-sheet.

CIT Bank Platinum Savings

With a minimum balance requirement of $5,000, CIT Bank’s Platinum Savings account can provide you with high interest rates and FDIC insurance protection.

Introducing the BMO Alto Online Savings Account - a comprehensive cash account merging the convenience of checking, investment and savings accounts into one top-notch product. Unlike traditional banking institutions, cash management accounts are offered by non-bank financial institutions. You won't find a better cash management account option out there.

Looking for a top-tier cash management account option? Look no further than Wealthfront's Cash Account. With a wide range of services and features similar to checking and savings accounts, as well as investment accounts, you'll have everything you need in one place. Head to Wealthfront's website to sign up for the Cash Account today.

Betterment's Cash Reserve is the perfect option for those seeking a comprehensive cash management account. This account offers a variety of services that bridge the gap between checking, savings, and investment accounts. To sign up for this outstanding service, head to Betterment's website today.

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As of 5/8/23, the APY (annual percentage yield) for this variable account is an impressive 4.50%. Certificates of deposit (CDs), on the other hand, are savings accounts with fixed rates and terms, which typically offer higher interest rates than regular savings accounts.

Don't miss out on the opportunity to invest in our BMO Alto Certificate of Deposit, fully insured by FDIC to ensure your peace of mind.

Checking accounts, meanwhile, are ideal for your everyday cash deposits and withdrawals. Don't hesitate to take advantage of our Current Account, also insured by FDIC.

Secure your finances now and invest in your future with our range of savings and checking accounts.

The Current Account offered by Chime is backed by FDIC insurance, providing peace of mind to customers. Meanwhile, the Axos Bank Rewards Checking option boasts an impressive APY of up to 3.30%, which can be earned through various combined rate rewards. To qualify for the interest rate, customers must have direct deposits totaling $1,500 or more each month, excluding intra-bank transfers, and ten point-of-sale transactions using their Rewards Checking Visa Debit Card for purchases of at least $3 per transaction. Alternatively, enrolling in Account Aggregation/Personal Finance Manager (PFM) or maintaining an average daily balance of $2,500 per month in an Axos Self Directed Trading Invest account or an Axos Managed Portfolio Invest account can also earn the high APY. Furthermore, customers can earn a maximum of 0.60% by making a monthly payment to an open Axos Bank consumer loan via transfer from their Rewards Checking account.

Money market accounts provide a rate of return similar to savings accounts and come with certain checking features. For instance, the UFB Premier Money Market and Discover Bank Money Market Account fall within this category.

When selecting a checking account, it is advisable to go for an account that either does not have a maintenance fee or has an easy means of waiving it. The best accounts also offer interest, but the rates may come with balance limits and spending requirements. Generally, checking accounts offer lower rates than high-yield savings accounts. Besides having no monthly fees, top-tier checking accounts provide access to national ATM networks free of charge. They may even come with sign-up bonuses, and debit cards are usually standard options, making routine transactions a breeze.

» Are you ready to select? Check out our recommended checking accounts.

Savings accounts with competitive rates, no monthly fees, and easy online bank transfers are considered to be the best in the market. Look for accounts with annual percentage yields of about 2% or more and with no monthly service fees. While the FDIC announced in April 2020 that it was no longer mandatory for financial institutions to impose withdrawal limits, you should verify with your financial institution to confirm that it does not enforce a limit. In case a limit is in effect, there could be a fee of around $5 to $10 for each excess withdrawal. (Find out more about saving withdrawal limits here.)

» Ready to compare savings? Check out our list of high-yield online savings accounts.

By depositing your money into an account that earns above-average interest, you can effortlessly grow your balance over time. Although checking accounts may not be intended for accumulating large balances, some do offer interest. On the other hand, savings accounts are specifically designed to grow, making it crucial to maximize the annual percentage yield for optimal gain.

While the average savings account APY stands at a mere 0.40%, some banks and credit unions offer rates of around 2% APY or higher, indicating the wide range of options available. The difference between a higher APY becomes apparent when considering that a $5,000 deposit earning 0.05% APY after a year generates only about $3, whereas a 2% APY earns you an additional approximate $100 for minimal extra effort.

If you're interested in more alternatives to regular savings accounts, you could consider a money market account that pays interest and comes with a debit card or check-writing ability but may require higher minimum balance requirements. Alternatively, a certificate of deposit that obliges you to leave your deposit for a specific duration could be worth considering if you have a large balance to deposit and do not require withdrawal for several months. These options tend to have higher interest rates than traditional savings accounts.

Premium checking accounts are another option offered by certain banks to clients with enough assets to qualify for them, providing perks such as ATM fee reimbursements and discounted mortgage rates.

If you're looking for a fixed interest rate, a CD is a better option than checking or savings accounts, while a no-penalty CD is a viable alternative for those seeking a fixed-rate account with access to their money before term-end.

Looking to explore more financial calculators or get answers to frequently asked questions about checking and savings accounts? Visit NerdWallet for further guidance.

What happens to my money in a checking or savings account if the bank fails?

Federal insurance protects deposit accounts in most banks and credit unions up to $250,000 per depositor. For banks, the Federal Deposit Insurance Corp. provides insurance, while the National Credit Union Administration federally insures credit unions. If a bank or credit union goes under, depositors would be secure up to the insured amount, meaning you will not lose your deposit.

If you'd like to understand more about the insurance programs that protect your funds, check out how FDIC and NCUA insurance works.

Is it preferable to have my checking and savings accounts at the same bank?

It can be advantageous to have both accounts at the same bank or credit union for easy account management and instant transfers between accounts. Additionally, some banks may allow you to bypass monthly fees if you link your checking and savings accounts, but there may be a requirement for maintaining a minimum balance in the combined accounts.

However, there are disadvantages to combining accounts, such as not having the best options for both checking and savings accounts in one place. For instance, some banks with the most competitive savings rates might not have suitable options for checking accounts.

If you are looking to maximize your savings but don't want to close an existing account, you may consider opening a separate high-yield savings account with another bank. Check out our list of banks offering high savings rates this month.

Some fees you might encounter with checking accounts include monthly maintenance fees and savings withdrawal limit fees, although these are typically minimal, and some banks allow you to get checking accounts without these fees. In addition, savings accounts can charge fees for withdrawal limits. But you can find some savings accounts that waive these fees.

Most banks offer online and mobile banking services for balance inquiries, transfers, and account alerts, but bill pay services might come at an extra cost. Mobile check deposit is also a common feature, but not every bank has it.