Are There Any Real Differences Between Checking And Savings Accounts?

Are there any real differences between checking and savings accounts? Today, many of the lines are somewhat blurred at the differences between checking and savings account, but they do exist. In the early...

In the early days of banking, a checking account was one that you wrote checks against to pay bills or purchase products. A savings account was an account that earned interest on the amount and was paid at varying times depending on the account type. Today, many of the lines are somewhat blurred at the differences between checking and savings account, but they do exist.

"Yes. Besides interest being earned on savings accounts, there are regulatory restrictions on savings accounts that limit the number of withdrawals," says the Executive Vice President and Director of Client Services of American National Bank, who has thirty years in the banking industry. "These restrictions exist because of mandated reserve requirements for banks to ensure they have available funds to fulfill cash needs of their customers," said Lee.

Some checking accounts such as interest bearing or money market will earn interest on the amount. Typically, these accounts have minimum balances that need to be maintained in order to avoid monthly fees. The money market account may have a variable earning interest rate that moves up or down based on how much the account holds at the time. Interest paid also varies on the accounts, so be sure to research the details before signing up for it. These accounts may also limit the number of checks that can be written against them.

Savings accounts have similar offerings to interest earning checking accounts now. They not only earn interest at different rates, but also have fees and allow a certain number of transactions per month against the account. The Federal Deposit Insurance Corporation or FDIC though does not insure some types of savings accounts. Others, such as certificates of deposit, are limited to the standard $100,000 insured amount. This can be quite a difference between the account types. It is best to check with the banking institution or the FDIC to get a definitive answer.

When transferring money, there may be more delays with taking money from savings accounts than checking accounts. The time difference can be up to five days, but to be sure, check with the institution on their policies. The Feds have regulations on availability of deposits, which can guide you in choosing the best options.

One difference between checking and savings account is that savings accounts tend to earn higher interest rates. The higher rate comes from the fact that you are agreeing to allow the bank to use your money to make money for itself. In return, the bank pays you a certain amount of interest on the amount at predetermined time intervals. Research the current interest rates and know the terminology you are likely to run across. Other definitions to be aware of are the annual percentage rate or APR, the maturity date of CDs and bond and penalties.

If you wish to use a debit card, they are linked to a checking account. Another difference between checking and savings accounts is that overdraft protection can be added to a checking account. Interest types such as tiered and compound are found on savings accounts.

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