Both checking and savings accounts are usually offered by banks, but what is the difference and the purpose of each of these types of accounts?
What is a checking account?
The general purpose of a checking account is to spend money. They typically come with a debit card and a checkbook, and they are expected to be used on a daily basis. Keep in mind that banks will not be paying interest for the money you have in this account. You should be looking for these key factors when you are trying to open a checking account:
- The minimum required for this account.
- The availability of free ATMs across the country/world.
- Possible fees.
- If you have to pay interest (not usual).
What is a savings account?
The general purpose of a savings account is to save money, therefore, banks will pay you interest for having your money in the account, which will make your money grow or at least keep it from losing its value over time. On the other hand, you should keep in mind that you will most likely have a certain number of limited withdrawals per month, which makes your money a bit less accessible. When you are trying to open a savings account you should take a look at these factors:
- The minimum balance required for this account.
- The number of withdrawals you have per month.
- The annual percentage yield (APY). The higher the yield, the more money you get.
- Possible fees.
Both types of accounts are useful, and the main difference relies on the purpose of the account. Use your checking account for your everyday spending, and use your savings account to put away money you don’t readily need.
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