Checking and Savings Accounts

The two most commonly used bank accounts are checking and savings accounts, and we show you how they each work and what their differences are.

The bank accounts you use most often are checking and savings accounts. They have different features but both hold money for safekeeping. It?s important to understand the differences between these accounts so you can know when to use each one.

You can use your money in a variety of ways with a checking account, for it is designed for frequent transactions. It is best for money you plan to spend soon and is used for payments. You can eliminate the need to pay your chronic bills manually by arranging to have funds deducted automatically from your checking account each month to pay for them.

For example, from your checking account you can set up automatic insurance premiums, mobile phone bills, and mortgage payments. You can spend money easily from your checking account balance with a debit card. You can enter your card information for online payments or swipe the card for in-person purchases.

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For cash withdrawals at ATMs, and even deposits there in some cases, you can also use your debit card. You are not paid interest on your account balance in traditional checking accounts, but there are some that do pay you something.

Savings accounts pay you a modest amount of interest on your account balance while keeping your money safe. They are good for money you don’t need right away and are used to save for the future. Savings accounts can help when you?re saving for financial goals or a rainy day.

You?re less likely to overspend when you remove funds from your checking account. Using multiple savings accounts for various goals can even make sense. You can access funds in several ways when you need to spend your savings. However, how often you can make certain withdrawals from savings is limited by federal law.

Certain types of transactions are unlimited, but every month you can only make up to six withdrawals. When you plan on spending, you can move money to your checking account from your savings account. If both accounts are at the same bank, that?s almost an automatic, and to move money from one bank to another typically takes a few days. Before you open an account it?s critical to review fee schedules, but checking accounts tend to be more expensive than savings accounts.

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