What’s the Difference Between a Checking Account and a Savings

Although many mistakenly believe that a checking account and a savings account is the same, there are actually many differences between the two. Traditionally, a checking account is used by individuals to pay bills or purchase products by writing checks. A savings account on the other hand is an account that earned interest whenever an amount was paid. A regular earner usually opens and maintains two kinds of accounts depending on his or her financial need and status.

Before discussing the differences, perhaps it would be nice to go over the similarities between the two accounts. Both savings account and checking accounts are the same in terms of the benefits that could be gained. For one, both are safe places to keep one’s money. Both accounts also provide the option of withdrawing the money whenever it is needed.

With a savings account, one does not need to have a large amount of cash to open an account. Another added bonus is that the money saved in the account could earn interest. This is not the case with a checking account for the money saved may not earn interest.

With a savings account, it is imperative that an individual go to the bank to withdraw money. Another limitation of a savings account is that an individual is not given the option to write checks. A checking account on the other hand allows the individual to write checks. This is beneficial for it provides the individual with the capacity to keep track of his or her spending. A checking account is also a safe alternative to carrying a lot of cash or money with you.

Aside from the money not earning interest, another drawback from a checking account is that one should more likely pay fees for checking. Thus, checking accounts are usually used for paying bills and buying  on a short-term basis. Savings accounts on the other hand are employed for saving money for emergencies.  They are also used for medium term to long term investment.

Before choosing whether one should open a savings account or a checking account or even both, it would therefore be wise to consider the above differences and similarities. It would also help if one is clear with his or her financial and economic goals in life so that a better direction would be taken in terms of making banking decisions. By knowing the right information in terms of the pros and cons of both accounts, an individual would be better guided.