When you open bank accounts, there are typically two primary types of accounts available. One is a checking account and the other is a savings account. Each type of account serves its own purpose. Additionally, different banks offer different types of programs for each type of account. Before you can decide which type of account you need, or if you need both types of accounts, find out what you need to know.
Checking and savings accounts are both bank accounts where you can deposit and store your money. The Federal Deposit Insurance Corporation (FDIC) insures both types of accounts. The primary purpose of a checking account is to pay bills and expenses. You can access the money in your account by writing a check, using online bill pay or withdrawing cash. Most checking accounts also come with a debit card, so you can make purchases and the amount of the purchase is a direct debit from the checking account balance.
The primary purpose of a savings account is to save money. Money you put in your savings account can be for emergency purposes. You can also earmark the money in your account for a specific purpose, such as saving for a car. While most checking accounts do not pay interest on balance in the account, a savings account does allow you to earn interest on your money. You can typically access your savings account with an ATM card or making cash withdrawals.
Many banks have checking account and service fees that you have to pay to maintain the account. Some banks provide options to customers to help to avoid paying these fees. For example, Bank of America offers an eBanking option. As long as you agree to receive statements online and make withdrawals and deposits online or at an ATM, Bank of America waives the monthly fee.
Chase offers a Student Checking Account with features that cater to college students. The checking account includes features such as:
- A complimentary debit card
- Online banking
- Bill pay
- Free mobile banking
- Account alerts
Bank of America offers several different savings account options. One of the features is the Keep the Change® Savings Program. In order to participate in the program, you have to have a checking account, savings account and debit card with Bank of America.
When you make purchases with the checking account debit card the bank rounds up the purchase amount to the nearest dollar. The difference between your purchase amount and the nearest dollar transfers into your savings account from your checking account. For the first three months of the program, Bank of America matches the transfer amount penny for penny to a maximum amount of $250 for the three months.
For example, you go to the grocery store. The total bill comes to $45.13. Bank of America rounds up your purchase to $46. The store receives the payment of $45.13. The difference of 87 cents transfers into your savings account.
Understanding the difference between savings and checking accounts helps you decide which type of account you need. Choosing the right account also entails evaluating the special programs that various banks offer.