Checking vs. Savings Accounts: The Differences and Why You Need Both

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Whether you’re looking to open a new bank account or taking time to restructure your finances, organizing your money into separate accounts is a great way to keep track of your spending and saving.

In this article, we’ll take a look at some of the key differences between checking and savings accounts, as well as how to use both of them together.

What Is a Checking Account?

Your checking account is the account that you’ll use to pay regular bills and day-to-day expenses. This will be the account linked to your debit card and checks that you’ll make purchases with. 

Checking accounts have no limits to how many transactions you can make in a certain timeframe, which means you’ll have easy, unlimited access to the money in this account. Beyond what you need, it’s best not to keep a lot of additional money in your checking account. That’s because this money most likely won’t be accruing much interest, if any at all. 

What Is a Savings Account?

Your savings account is ideal for earning interest, goal setting and keeping your money protected over time. The key difference between this account and your checking account is that you’ll have a limited number of withdrawals per month. While your money will still be available in an emergency situation, you’ll be less tempted to regularly pull funds from this account. 

Any money that you aren’t using for bills or day-to-day spending should be in your savings account. These accounts earn interest, which is why you’ll want to keep any spare funds here and let your money work for you. You can use our savings account calculator to see how much interest you can earn on your savings. It may even make sense for you to have multiple savings accounts in order to set clear savings goals if you have more than one.

With the recent run-up in interest rates, it is more important than ever to utilize a savings account in addition to a checking account.

How to Use Checking and Savings Accounts Together

While each type of account has its own purpose, they both can be beneficial to you. This is especially true if you use the accounts together in a way that helps you achieve your financial goals. 

To get the most out of both your checking and savings accounts, follow these five steps:

  1. Open a Checking Account and a Savings Account
  2. Link Your Accounts
  3. Set Up Direct Deposit
  4. Automate Your Savings
  5. Consider Setting Savings Goals

1. Open a Checking Account and a Savings Account

If you already have a checking account and a savings account open, you can either keep them and use them together or open new accounts if they aren’t living up to your standards. To know whether or not an account is worth keeping or opening, look for the following perks.


Qualities to Look for in a Checking Account:

  • No fees
  • Free ATM access or reimbursement
  • Ability to deposit cash at an ATM
  • Good mobile/app experience for check deposit
  • Interest-earning account
  • Free paper checks
  • Federally insured by FDIC or NCUA

When it comes to where to open your checking account, money expert Clark Howard recommends using an online bank or credit union. For specific recommendations, check out Team Clark’s picks for the best free checking accounts.

Qualities to Look for in a Savings Account:

  • High interest rate
  • Low or no minimum opening deposit
  • Low or no account fees
  • FDIC or NCUA insurance to protect your deposits
  • Low level of consumer complaints

For your savings account, you may have better luck finding high interest rates at an online bank. Consider moving your money to one of these top choices for the best savings accounts.

If you’d rather have both accounts at the same bank, opening them both online is another great option.

“If you like online-only, then you can have both accounts at an online bank,” says Clark. “Most online banks have zero fees and minimums on their checking accounts and high interest on savings.”

Once you decide where you’d like to bank, visit their website to apply online or find your nearest branch. If you’ll be moving from an existing account, be sure to check out these four simple steps to switch banks.

Once you have checking and savings accounts that you’re satisfied with, make sure you can easily move money between the two by linking your accounts.

Whether your accounts are at the same bank or different banks, it’s worth taking the time to go into your account settings online and make sure they’re connected. With most banks, you can use the app or log in online to do this. Just be sure to have your routing and account number ready to enter. Once you’ve logged into your account and opened your settings, look for an option that indicates linking an external account or transfers. From there, enter your other account’s information and follow the instructions. 

If you’re having trouble linking your accounts online, you can always call or visit your bank’s nearest branch and ask a teller to link them for you.

3. Set Up Direct Deposit

This step is specifically for your checking account. 


Your checking account is there for you to pay your monthly bills and day-to-day expenses. For that reason, your regular paycheck should be deposited into this account.

If you don’t already have direct deposit set up with your employer, take care of this as soon as possible. You can typically enroll by giving a voided check to your company’s HR department. 

Hopefully, there will be money left over from your paycheck after all of your expenses. While you want to transfer the majority of your savings out of your checking account, you don’t want to leave it at a $0 balance either. 

“You want to keep enough cushion in your checking account so that you don’t inadvertently overdraw it,” Clark recommends. “But other than that cushion, everything should be in an online savings account earning interest.”

He goes on to say that a decent safety amount in a checking account would be about 50% of a typical month’s bills. That way, you know that you’ll be covered in the case of an unexpected charge.

4. Automate Your Savings

In order to grow your savings account, consider having a percentage of your paycheck automatically deposited into a separate account. You can talk to your employer or HR contact to set this up.

If you aren’t able to set up direct deposit into two accounts, view your savings as another monthly bill and be sure to deposit any non-essential funds from your paycheck into this account. It’s important to build up your savings account so that you can take advantage of the interest offered and ensure that you’re protected in the case of any future emergencies.

“Your rainy day fund should ultimately cover six months worth of expenses,” Clark recommends. “If your rainy day fund now is zero minutes, like it is for 40% of Americans, you can build up a reserve slowly until you get there.”

Automating your savings is a great way to build this fund over time because you won’t miss money that was never available in your checking account to begin with.

5. Consider Setting Savings Goals

Once you’ve opened and linked your checking and savings accounts, set up direct deposit and automated your savings, consider taking your banking to the next level by using your accounts to set savings goals

Some savings accounts offer sub-accounts that allow you to sort the money that you’ve saved into categories. If your savings account doesn’t offer this feature, it’s not uncommon to open more than one savings account at the same bank

Each of your accounts will earn the same interest and you’ll be able to visually see the progress you’re making toward each of your goals. You can even name each of your accounts (vacation fund, wedding fund, emergency fund, etc) in order to stay organized and inspired.


Final Thoughts

Overall, both checking and savings accounts have a specific purpose. Still, they can be used together in order to set and achieve goals over time.

Once you’ve opened a checking account and a savings account, the next step is to link them for easy transfers. Then, you should set up direct deposit to your checking account. 

Your checking account should be used to pay your monthly bills and day-to-day expenses. Apart from a little cushion to prevent overdraft fees, any additional money should be moved to your savings account.

Consider automating your savings to build this account over time. From there, you can begin setting and achieving financial goals using your bank accounts.