Checking or Savings Account? How to Know Which Account to Use

Opening a bank account seems simple until you’re looking at your options and wondering whether your money belongs in checking, savings, or both. Knowing the difference can make it easier to manage everyday expenses, set money aside, and make the most of each account.

This guide explains what checking and savings accounts are used for, how they differ, and how to decide how much money to keep in each.

What is the difference between a checking and savings account?

A checking account is designed for money you use regularly, while a savings account is designed for money you want to set aside. Checking accounts make it easy to manage everyday expenses like groceries, utility bills, rent, or a mortgage payment. Savings accounts give you a separate place to build an emergency fund, save for a larger purchase, or work toward another financial goal.

How you access your money can be different, too. Checking accounts typically offer several ways to make purchases and payments, including a debit card, checks, and ATM withdrawals. Savings accounts generally have fewer ways to spend money directly. Keeping your savings separate from your everyday spending can make it easier to leave that money alone until you need it. Eligible deposits in both checking and savings accounts at an FDIC-insured bank are protected by federal deposit insurance, subject to FDIC coverage limits.

What is a checking account used for?

A checking account is your financial home base for everyday money. It’s where your paycheck may land through direct deposit and where you can keep the money you need for regular expenses. Think groceries, gas, utility bills, subscriptions, and other day-to-day purchases.

Checking accounts also come with tools that make it easy to manage and use your money:

• Debit card: Pay in stores, online, or at ATMs
• Check writing: Useful for rent, some bills, or payments to individuals
• Online and mobile banking: View balances, transfer funds, and pay bills from your phone
• Direct deposit: Receive paychecks or government payments automatically

Because checking accounts are designed for everyday use, they may pay little or no interest, depending on the account. Their main benefit is easy access to the money you need for regular spending and bills.

What is a savings account used for?

A savings account gives you a separate place to set aside money for later while earning interest. You might use one to build an emergency fund, save for a vacation, put money toward a down payment, or prepare for another future expense.

Savings accounts earn interest, which is commonly shown as an annual percentage yield (APY). APY helps you compare how much interest different accounts could earn over a year, including the effect of compounding. The rate can vary by account, so it’s worth looking at the APY along with any fees or balance requirements.

Savings accounts also tend to offer fewer ways to spend money directly than checking accounts. Keeping savings separate from your everyday spending can make it easier to see your progress and keep money set aside for the goals that matter to you.

How do checking and savings accounts compare?

Checking and savings accounts serve different purposes, but they can work well together. Here’s a quick look at how they typically compare:

Some accounts offer features that fall somewhere in between. For example, an interest-bearing checking account may let you earn interest while keeping easy access to your money. Money market accounts may also combine savings features with additional ways to access your funds.

Before opening any account, look at the interest rate, fees, balance requirements, and account features so you know what to expect.

How much money should you keep in checking vs savings?

There isn’t one amount that works for everyone. A good starting point is to keep enough in checking to cover your regular expenses, upcoming bills, and a little extra for the unexpected. Money you don’t expect to need for everyday spending can then go toward savings.

To decide how much you need in checking, consider:

• Bills due before your next paycheck
• Regular expenses like groceries, gas, and household needs
• Automatic payments and subscriptions
• When and how often you get paid
• A comfortable cushion for expenses that may be higher than expected

For example, say $2,000 is deposited into your checking account on payday. After looking at your upcoming bills and regular expenses, you decide you’ll need $1,850 before your next paycheck. You could move the remaining $150 into savings to put toward your emergency fund or another goal.

If you’re building an emergency fund, a common goal is to work toward three to six months of essential expenses. Your goal may be different based on your income, expenses, family needs, and what helps you feel financially prepared.

Tip:

Consider setting up an automatic transfer from checking to savings after payday. Even a small amount can add up over time and help make saving part of your regular routine.

What fees come with checking and savings accounts?

Checking and savings account fees vary by bank and account. Some accounts charge monthly fees, while others may waive them when you meet certain requirements, such as maintaining a minimum balance or setting up direct deposit.

Common checking account fees may include:

• Monthly maintenance fees: A recurring fee that may be waived when certain account requirements are met
• Overdraft fees: A fee that may apply to certain transactions when you don’t have enough money available in your account
• ATM fees: A fee that may apply when you use an ATM outside your bank’s network

Common savings account fees may include:

• Monthly service fees: A recurring fee that may be waived when you meet certain balance or account requirements
• Withdrawal or transfer fees: Some accounts may charge fees for certain withdrawals or transfers

When comparing accounts, look at the full picture. Consider fees, balance requirements, interest rates, and the features you’ll actually use. A savings account with a higher APY, for example, may be less helpful if regular fees reduce what you earn.

Which account is right for your situation?

The right account depends on what you need your money to do.

• For everyday spending: Consider a checking account if you need a place for direct deposit, bills, debit card purchases, and other regular expenses.
• For money you’re setting aside: A savings account can help you build an emergency fund, prepare for a future expense, or work toward a specific goal while earning interest.
• For a little of both: You may find it helpful to use checking for everyday expenses and savings for money you don’t plan to spend right away.

You don’t have to figure it all out on your own. Explore Forward Bank’s checking and savings options or connect with a local team member to find an account setup that works for you.

Next Steps

• Review what’s in your checking account. Make sure you have enough for upcoming bills, regular spending, and a cushion that makes you feels comfortable.
• Choose a savings goal. Whether it’s an emergency fund, a vacation, or another future expense, having a purpose for your savings can make it easier to track your progress.
• Make saving easier. Consider setting up an automatic transfer or splitting your direct deposit so money can move into savings on a regular schedule.