The Difference Between a Checking & Savings Account

a man budgeting his monthly income on his computer

Checking and savings accounts look similar in many ways, but each has its own features, purposes, and limitations. In general, it’s best to have both when managing your funds.

Difference Between Checking & Savings Account Quick Comparison

Checking Account

Savings Account

Purpose and Usage
Hold funds and make them available for regular expenses. Hold money long-term to accumulate interest and form a reserve fund.
Common Feature
  • Debit card/paper checks
  • Overdraft protection
  • ATM access
  • Direct deposit
  • Online/mobile banking
  • Direct deposit
  • ATM access
  • Branch access
  • Online/mobile banking
Typical Rates and Fee
Low-interest rates (0.04% average APY)

Fees may include:

  • Monthly service fees
  • ATM fees
  • Overdraft fees
Higher interest rates (0.06% average APY)

Fees may include:

  • Monthly service fees
  • Withdrawal limit fees

What is a Checking Account

A checking account is a financial account at a credit union or bank that allows you to make deposits and withdrawals.


The purpose of a checking account is to keep your funds secure while at the same time being easy to access. Checking accounts are great for handling regular expenses ranging from everyday shopping to monthly bill payments.

Common Feature

Checking accounts typically include the following features:

  • Debit card for regular purchases
  • Paper checks
  • Overdraft protection
  • ATM access for deposits and withdrawals
  • Direct deposit
  • Mobile and online access/services

Typical Rates and Fee

Most checking accounts don’t offer interest, but the national average for the ones that do are generally around 0.04% (as of the first week of June 2020).

As for fees, checking accounts often—but not always—come with an assortment of fees that are charged to account holders. These fees may include:

  • Monthly maintenance fees
  • ATM fees (when using ATMs that aren’t part of your institution’s network)
  • Overdraft fees 

Concerning monthly maintenance fees, these can often be waived by meeting specific requirements set by the financial institution, such as maintaining a minimum balance in your account.

What is a Savings Account

A savings account is an account for holding funds and accumulating interest for prolonged periods.


The purpose of a savings account is to hold funds that aren’t intended for immediate spending. Instead, they’re left to sit and accumulate interest over time, making them a great way to save up for future expenses or create an emergency fund. They allow only a limited number of withdrawals per month (up to six times per month per federal law).

Common Feature

Savings accounts often come with the following features:

  • Direct deposit
  • Access through your local branch or ATMs
  • Online and mobile access and services

Typical Rates and Fee

Savings accounts generally offer higher interest rates than checking accounts, averaging out to 0.06% APY as of June 2020. Money market savings accounts offer a slightly higher rate on average (0.09% APY).

Since savings accounts have limits on the number of transactions made per month, they don’t have the same fees as checking accounts. However, they may still be subject to certain fees such as:

  • Savings withdrawal limit fees (charged when you withdraw too much)

Monthly maintenance fees

As with checking accounts, monthly fees may be waived if you meet specific requirements, such as linking your savings and checking accounts. The exact requirements and fees assessed vary by institution, so it’s worth looking for one that offers favorable terms.

Using Both Checking and Saving

For most people, it’s best to have both a checking account and a savings account. Doing so gives you the best of both while potentially counteracting the disadvantages of each.

Why use both

With a checking account, you’re able to keep funds fairly secure and still have them accessible for everyday use. As such, it’s important to keep enough money in your checking account to cover your monthly expenses.

A savings account, on the other hand, lets your money accumulate more interest than it would if it were left in a checking account. Because of that, it’s best to keep extra funds in your savings account.

How to allocate fund

For checking accounts, a good rule of thumb is to have enough for two or three months of spending plus any minimum balances. Anything beyond that kept in checking would likely be better put elsewhere.

Excess funds should be put into a savings account. That way, they can act as an emergency reserve in case you lose your job, face unexpected expenses, and so forth. In addition, they’ll accumulate more interest over time than they would in a checking account. 

As a side note, if you have more than three to six months’ worth of savings, you may want to start investing the excess in other types of accounts, such as retirement accounts.

Choosing the best feature

Choosing the best accounts for your situation depends on your financial needs. Not every institution offers the same features or charges the same fees. 

For example, at Baton Rouge Telco, we offer several options for both checking and savings accounts. 

The features we offer on our savings accounts include:

  • Open an account with just a $5 deposit
  • No monthly service fees
  • Overdraft protection for your checking account

We also offer money market accounts, certificates, and specialized accounts to help you save for special occasions (like Christmas). 

Our checking account options include:

  • Elite checking with an APY of 0.05% on balances over $2,500
  • Student checking with APY up to 0.5% on balances up to $10,000
  • Premier interest checking, which allows up to 4.00% APY on balances up to $10,000
  • Opportunity checking, designed to help people on the path of financial recovery

Except for our Opportunity accounts, no monthly fees are assessed, and all of these accounts provide a bit of interest. On top of that, there are no minimum balances required.

What a Checking Account Is Used For


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