When you are ready to open a bank account, the two main options you can pick from are checking or savings. Although both perform the same basic task—holding your money—they have very different functions and benefits. In fact, they offer such unique and essential merits that nearly all experts agree you should have both! To help you understand why you need both, let's explore the difference: checking accounts vs. savings accounts.
Checking accounts are transactional accounts.
Your bank or credit union is expecting you to make regular transactions, though you certainly don't have to do so. In addition, to ensure that you can easily and conveniently access the money in your checking account, most banks and credit unions offer tools like checkbooks, debit cards, ATM access, and mobile apps.
Some banks charge fees on checking accounts, like monthly service fees. When looking for a checking account, consider one with no monthly maintenance fee. Many checking options are non-interest bearing. However, if you do your research you can find checking accounts with rewards, like cash back or interest yields. Many credit unions, like BluCurrent, offers checking accounts with no monthly maintenance fee and big benefits.
are meant to hold (you guessed it!) your savings. They pay interest, and typically have little to no fees. Although you will probably place your long-term savings in an investment account like a 401(k) or an IRA, a savings account is a great place to build an emergency fund or save for major purchases (such as a vacation, a car, or a down payment on a house). Savings accounts also aren't as vulnerable to thieves as checking accounts, since they aren't typically connected to checks, debit cards, or electronic payments.
A savings account is not meant to be a transactional account, so the money you place within it will be harder to spend. Banks and credit unions typically limit the number of transactions that you can make with a savings account, and if you go over that amount you will likely incur a fee.
WHY YOU NEED BOTH
You likely already have a checking account, but it's important that you have a savings account as well. Your checking account is great for spending (making daily purchases with your debit card, paying your bills), but it's not a great place to save your money. For that, you'll need a savings account. Because the money in a savings account is harder to spend, you won't be as tempted to use it. If you have trouble saving money, you could even deposit a lump sum into your savings account each month. Just separating your savings from the money you're allowing yourself to spend could help you make smarter financial decisions and save for the future.
One gives you easy access to your money, while the other helps you save your money. In comparing checking accounts vs. savings accounts, we hope that you can see why both accounts are so beneficial to building a healthy financial future. When you're ready to open a checking or savings account, be sure to check out our full line of offerings at BluCurrent