How a checking account differs from a savings account?

At a very basic level, a savings account is meant for what its name stands for – to save money over an extended period of time. As compared to a savings account, a checking account is a more dynamic and frequently used account, in which the account holder can deposit cheques, withdraw money and issue checks from. But apart from this basic difference, there are also a number of differences in their features, a few of which are explained below.

Interest Payout 

Savings accounts almost always carry an interest that is payable on the balance kept in the account. The rate of interest is different for different banks, and sometimes the mode of calculation also varies. Some banks calculate interest on a daily basis, whereas other banks calculate interest on the lowest balance kept in the account during a month. Checking accounts generally do not bear any interest to the account holder, whatever is the amount of money kept in the account.

Charges 

Savings accounts usually charge lesser fees, provided you limit the withdrawals from the account. But checking accounts usually charge transaction fees for things like bill payment, use of overdraft, ATM usage etc.

Bill Payment 

This is a wonderful facility that checking accounts offer, but most savings accounts do not. If there are some utilities or other bills which are to be paid every month, then a checking account offers you the facility of tying up directly with the concerned company, so that the bill amount can be transferred directly every month from your checking account to the company’s account.

Transaction Limits 

By definition, a savings account is one in which you deposit your savings into the account on a regular basis, but do not withdraw money, or if at all you do, then after long intervals. Hence there are monthly limits on the number of withdrawals and ATM usages that you can do in your savings account. On the other hand, a checking account does not limit the number of transactions in a particular month; neither does it have any charges for transactions above a certain limit.

Access to funds 

A checking account allows the account holder to withdraw money at any time using internet banking, ATM or a cheque. Savings account try to limit the number of times you can access your funds, either by not issuing ATM cards, or by insisting on the account holder to visit a branch in person to withdraw cash.