The Difference Between a Checking & Savings Account

Checking and savings accounts look similar in many ways, but each has its own features, purposes, and limitations.

Checking and savings accounts are like partners in a good cop drama. They’re sort of similar but also very different, with their own features, purposes, and limitations. And, they’re at their best when they are working together to serve and protect your financial interests.

Let’s take a closer look at what checking and savings accounts are each designed to do, what sets them apart, and why you really need both to make the most of managing your money.

What Is a Checking Account?

A checking account is a deposit account held at a credit union or bank that allows you to make unlimited deposits and withdrawals. You will normally open a checking account whenever you join a bank or credit union.

Your checking account is the workhorse of your financial portfolio, providing a place to keep your funds secure while also providing easy access to your money. You’ll usually have your paycheck or other income deposited into your checking account and you’ll pay many expenses from it, including:

  • Scheduled mortgage and loan payments
  • Monthly bills, including credit cards
  • Other recurring expenses
  • Your discretionary point-of-sale purchases

Common Features

Checking accounts typically feature:

  • A linked debit card for regular purchases
  • Paper checks
  • ATM access for deposits and withdrawals
  • Direct deposits and automated withdrawals
  • Mobile and online access/services

Rates and Fees

Most checking accounts don’t offer interest on deposits and those that do tend to pay very low rates. This is changing, and some checking accounts, including Baton Rouge Telco’s Premier Interest Checking Account, now offer decent rates or dividends.

Most institutions require an opening balance of at least $5 to establish a checking account. While some accounts may attract several fees, these might be waived by many institutions if you meet certain requirements, such as maintaining a specified minimum balance in your account. 

Common checking account fees include:

  • Monthly or annual maintenance fees
  • ATM fees (especially when using ATMs that aren’t part of your institution’s network)
  • Overdraft fees when withdrawals exceed your deposits
  • Fees to issue or replace debit cards and checkbooks
  • Fees to issue bankers checks and provide other services

Things to Look For

Checking accounts vary widely between institutions. Credit unions, as not-for-profit financial cooperatives owned by their members, are often able to offer more flexible terms than many commercial or online banks. When shopping for a checking account, look for:

  • No monthly maintenance fees or easy ways to waive them
  • Low minimum deposits
  • Free access to a large ATM network
  • No or low overdraft fees
  • Sign-up bonuses or special offers

How Safe Is Your Money?

Money deposited in most checking accounts is guaranteed by the federal government against loss due to fraud or the collapse of your institution up to a total of $250,000. This guarantee is administered by the Federal Deposit Insurance Corporation or FDIC for banks and the National Credit Union Administration or NCUA for credit unions.

Be sure to only bank with institutions that are registered with the FDIC or NCUA. Remember that if you are in the position to maintain a deposit over $250,000 in any single account, the money in excess of $250,000 is not federally insured. 

What Is a Savings Account?

A savings account is a deposit account held at a credit union or bank that is designed for holding funds and building interest over the medium to long term. Many credit unions require members to open a savings account with or without a checking account when they join.

Savings accounts are designed to hold funds that aren’t intended for immediate spending. Instead, this money is left to sit and accumulate interest over time, making these accounts a great way to save up for future expenses or create an emergency fund. 

While deposits are unlimited, most financial institutions limit the number of withdrawals or transfers permitted to just six a month. That said, some credit unions offer linked ATM services and allow you to write checks from your account, so your money can be accessed instantly if required. 

Common Features

Savings accounts typically feature:

  • Direct deposits
  • Access via your local branch or ATM
  • Online and mobile access and services
  • Limits on withdrawals

Rates and Fees

Savings accounts offer higher interest rates than checking accounts (although less than money market savings accounts) while typically requiring a very low or no minimum balance. That said, interest is usually paid only on deposits over a certain threshold.

Designed to limit the number of transactions per month, savings accounts don’t charge as many fees as checking accounts. They are still subject to charges including:

  • Savings withdrawal limit fees (charged when you withdraw too much)
  • Monthly maintenance fees (generally only if your balance is too low)
  • Transaction limit fees (charged if you withdraw money too often)

High-yield savings accounts offer a higher interest rate of dividends but generally require a larger minimum balance in order to support this.

Things to Look For

Savings accounts typically include fewer features than your far busier checking account. That said, some important things to look out for include:

  • A higher annual percentage yield (APY) to maximize your savings growth
  • Minimum balance requirements that you can easily maintain
  • No monthly maintenance fees or easy ways to waive them
  • Direct deposit services
  • Sign-up bonuses or other incentives

How Safe Is Your Money?

Money deposited in most savings accounts is also guaranteed by the FDIC or NCUA up to a total of $250,000. While interests may be lower than many other forms of investments, this makes your savings account one of the safest possible ways to accumulate earnings.

Also, remember that the interest rate you earn on deposits in a savings account is not fixed. In general, your APY will change in line with rate hikes or reductions by the Federal Reserve, but banks and credit unions are free to adjust rates as they wish.

Checking vs. Savings: Different Beats, Same Goals 

The following table summarizes the key differences between checking and savings accounts:

Checking Account Savings Account
Primary Use Spending for day-to-day expenses Saving for long-term goals or emergencies
Interest/Dividends Sometimes, but usually low Yes, rates vary by institution
Common Fees Monthly maintenance, overdraft, out-of-network ATM Monthly maintenance, minimum balance, withdrawal limit
Minimum Balance Varies by institution Varies by institution
Transaction Limits None Six per statement cycle
Accessibility Debit card, checks, ATM, online/mobile banking, direct deposit, branch access ATM, branch, online/mobile banking, sometimes check or direct deposit
Special Features Overdraft protection, early paycheck access, possible sign-up bonuses Overdraft protection, high APY options, potential sign-up bonuses
Withdrawal Limits Not applicable Limited to six withdrawals or transfers per month; fees may apply for exceeding
Deposit Insurance FDIC or NCUA insures up to $250,000 FDIC or NCUA insures up to $250,000
Market Exposure Interest rates are less affected by Federal Reserve actions Interest rates may increase with Federal Reserve rate hikes
Account Linking Can be linked to savings for overdraft protection Can be linked to checking for overdraft protection
Special Programs May offer rewards or cashback programs May offer special high-yield options or programs for specific saving goals

Despite these differences, or rather because of them, properly managed checking and savings accounts work together to help you achieve your financial goals, including budgeting your income, spending money effectively, and building up savings over time. Here’s how: 

Desk Job

A checking account allows you to keep your funds secure and monitor your balance easily, while still having your money accessible for everyday use. The trick is to keep enough money in your account to cover your maximum monthly expenses and unforeseen costs.

Savings Stakeout

A savings account, on the other hand, lets your money accumulate more interest or dividends than it would if it were left in a typical checking account. Make sure any extra funds go into your savings account and stay there to maximize your benefit over time. 

Locking It Up

Most experts suggest keeping 1-2 months of typical spending in your checking account—plus any minimum balance requirement—to cover your fluctuating monthly expenses. Anything beyond that can be put to better use.

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 earn more interest or dividends over time than they would in a checking account. 

If you can accumulate more than three to six months’ worth of savings, this money can be set aside in a savings or money market account as an emergency fund, invested in share certificates, or put aside in a specialist college savings or retirement fund.

It Takes Two: The Best Bank Accounts for Your Needs

Not every institution offers the same account features or charges the same fees. It’s worth taking the time to look at the offerings from different institutions. In many cases, your local credit union may be able to provide more flexibility and better rates than many bigger banks. 

At Baton Rouge Telco we offer a range of high-quality features on both checking and savings accounts to help our members manage their day-to-day expenses better while building towards their long-term financial goals. 

Choose from our range of federally insured checking accounts, including:

  • Our Premier Interest Checking Account is for heavy debit car users with no monthly fees or penalties and an unbeatable dividend on deposits.
  • Our flexible everyday Elite Checking Account has no monthly fees and dividends on qualifying balances.
  • Student Checking with no monthly fees or minimum balance, dividends on qualifying balances, and easy funds transfer from a linked parent’s checking account.
  • Our structured Opportunity Checking Account is a full-service checking account that pairs with your savings account to help you build a better future.

You’ll need as little as $5 to open any of our checking accounts, which all come with overdraft protection as well as real-time debit controls and alerts. And, you’ll be able to access cash from your paycheck up to two days sooner with 2Day Early Pay®. 

Baton Rouge Telco’s Traditional Savings Account features:

  • Competitive dividends
  • No service fees
  • Easy access via our mobile and online banking services
  • Deposits insured up to $250,000 by the NCUA

We also offer money market accounts, share certificates, and other fully insured specialized accounts to help you save for important events and a better future. 

Contact us today to set up your ideal Baton Rouge Telco account combination or click below to learn more about how a checking account can be your gateway to complete financial control.

Why You Should Open a Checking Account

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