Checking and Savings Accounts
Checking Accounts:
Once you know which account you are looking to use, there are multiple ways to manage your funds. Checking Accounts can be offered by banks or credit unions, which may charge you for their services:
You could be charged by an overdraft fee if you spend more than your account has. If someone wants to avoid this situation, they can purchase overdraft protection: an additional service that can transfer money from another account when the original has run out, or automatically decline the transaction.
Many banks and credit unions charge a monthly service fee unless you agree to a minimum deposit. If they do not charge a monthly service fee, and there is no apparent reason why, the bank or credit union should be insured by the FDIC or NCUA. The FDIC federally insures deposits for banks while NCUA does the same for credit unions.
To avoid monthly service fees, you can also set up a direct deposit between your account and the depositor.
Across other situations involving checking accounts, you can also charged for ATM transactions, opting for paper statements, and cancelling your account within less than half a year (a fee of around $25). One way to avoid a paper statement fee is by opting for paperless statements (which provide free digital information that you can print at home).
Savings Accounts:
Savings accounts require monthly service fees unless you share a checking account with the same bank and opt for automatic repetitive transactions from your checking account to your savings account. Most banks require a minimum deposit on your savings account to waive the management cost.
Both checking accounts and savings accounts have paper statement fees and overdraft fees, however, savings accounts often have higher interest rates and withdrawal fees. The ultimate goal of withdrawal fees is to keep people’s money in the bank.
Withdrawal limits, inactivity fees, and charges for stopping a transaction or check can vary from bank to bank. They can also be a deciding factor depending on whether someone plans to keep the money in the bank or frequently transfer it.
Comparisons:
A Checking Account is a type of bank account that allows the flexibility to deposit and withdraw money at any time, while a Savings Account is primarily used for long-term investment.
Checking Accounts are meant to have no limitations on transactions, however, they tend to have less interest than savings accounts.
If the role of our account is to invest the money you already have, a savings account can give more back in the future. On the other hand, a checking account can offer you the freedom to have daily transactions.
Savings Accounts have limitations on how you manage the amounts in our account, so if you are looking for daily digital payments, a checking account is the best option.