Savings vs. checking account: Here’s the difference

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June 18, 2025 | Alliant Credit Union

Checking and savings accounts both provide a safe spot and access to the funds we need when we need them. However, their features are different, and they’re meant for different purposes. Let’s break down the differences between a savings and checking account, how each account is unique and when to use each one.

What you'll learn

Savings account vs. checking account

Checking account

Checking accounts are specifically designed for frequent payments and money transfers. They are ideal for everyday transactions such as spending, making deposits, paying bills, withdrawing cash or paying your friend back for lunch. While checking accounts typically earn lower interest rates compared to savings accounts, they do not impose limits on the number of transactions you can perform. Consider opening a checking account to for your day-to-day transactions.

Checking account breakdown:

Savings account

Savings accounts grow your money over time while earning interest. Unlike a checking account, which is ideal for everyday transactions like paying bills and making purchases, a savings account is meant for storing money you don’t need immediate access to. Savings accounts typically offer higher interest rates, helping your balance grow which makes them a great option for building an emergency fund or working toward financial goals.

Savings account breakdown:

  • Use: Saving
  • Withdrawal limits: Financial institutions are no longer required under Regulation D to limit the number of transfers or withdrawals from savings accounts, making it easier to access funds.
  • Earns Interest: Usually yes, savings accounts are interest bearing, depending on your account

While checking and savings accounts serve different purposes, both play an essential role in managing your finances effectively and together they provide a balanced approach to spending and saving.

Best way to use a checking account

Since checking accounts are for frequent transactions, you have many options on how to access your money. The key is to maximize your money by avoiding fees.

Set up automatic payments: Never pay a late fee on your bills again with automatic withdrawals. You can even “pay yourself” by setting automatic transfers from your checking to your savings. This way your spending AND your saving are both automatic. You can set it and forget it and watch as your savings grow.

Move your spending to your debit card: If you find you’re overspending on a credit card, you may want to try moving your spending to a debit card. This could help you avoid spending money you don’t have because your transactions come straight out of your account. Also, debit cards are great for peer-to-peer payment (P2P) apps such as Venmo because many of the apps don’t charge you for connecting your account to a debit card.

Utilize your fee-free ATMs: The best checking accounts either give you ATM fee rebates on out-of-network ATMs or have thousands of fee-free ATMs – or both. You shouldn’t have to pay to access your money, so before opening a new checking account, explore your options. You never know when you may find yourself at a cash-only restaurant without cash in your wallet.

Write those checks: Many new checking accounts come with a free box of checks. Take advantage of the opportunity, even if check writing is a rarity. You’ll find you may need a good old fashioned check when giving birthday or wedding gifts or paying your rent. If you don’t want to carry around your checkbook, keep one or two checks in your wallet just in case.

Set up direct deposit: Your paychecks can go directly into your checking account each month thanks to direct deposit. It makes a huge difference by shorting the time it takes to access your money as well as simply being more convenient. Some financial institutions, Alliant included, also have a feature called Early Payday, where they release funds upon receiving the ACH files from employers (or soon after), rather than waiting for the specified payday itself.

Best way to use a savings account

Savings accounts are a great financial tool to help you reach your financial goals. Here are some key features to look out for when looking for a new account:

Don’t open an account with a fee: If your savings account comes with a monthly service fee, run. You’re trying to save your money, and it will be that much harder if you’re paying $20 a month in fees. Even a $4 monthly fee will mean you’ll have $240 less in your account in five years. Every penny counts, no matter what your savings goal may be!

Take advantage of the interest rate: The interest rate, also known as the annual percentage yield (APY), on your savings account is very important and may be worth the switch to a new financial institution. Some accounts require things like a minimum balance to earn interest. Make sure you are meeting those requirements so that you can get the most out of the account. If the requirements are unreasonably high or overly complicated, try shopping for a different account.

Open accounts for each savings goal: Similar to the envelope method of saving, having multiple supplemental savings accounts could help you see the progress of each of your savings goals. You could have an account for vacations, one for your bathroom renovation, and another for your emergency fund.

Are all checking and savings accounts the same?

No, not all checking and savings accounts are created equal. In fact, different accounts can vary drastically in the amount of interest you can earn and the number of fees you could accrue.

The best checking accounts have no monthly service fees, no monthly maintenance fees, free overdraft protection, and fee-free ATMs or ATM rebates. Some checking accounts will even give you a high rate on your average monthly balance. So, if you forget to deposit a chunk of change into your savings, not all is lost, and you’ll get some interest on that too.

The best savings accounts have a high APY and no monthly service fee. The average APY on a savings account can change but tends to be around 0.20%. Yikes!

Pro tip: Digital banks and credit unions tend to have the best rates and lowest fees. Just don’t sacrifice access. You’ll want to have ATM withdrawals and deposits as an option for when you need cash fast, plus great mobile and online banking tools to manage your money on your time.

Are my checking and savings accounts both insured?

What happens if a bank “goes under”? Most checking and savings accounts at banks and credit unions are federally insured up to $250,000. Banks are insured by the Federal Deposit Insurance Corporation (FDIC). Credit unions are insured for the same amount of money by the National Credit Union Administration (NCUA).

It’s very important to check that your financial institution is insured. Some places are not insured. So, if they go under, you could lose everything in your account – scary! Before opening a new account, check that your deposits are insured.

Should I have my checking and savings at the same bank?

It’s nice to have the option to have both your checking and savings accounts at one bank. If you’re only interested in opening one account, look for a bank or credit union that offers both, just in case. If you like one account, you may find that the other account is beneficial for your financial goals.

Get an award-winning savings account

Open a savings account at Alliant! Featured in the Wall Street Journal as the best credit union of 2025, you can earn more interest without a monthly fee in an Alliant High-Rate Savings account.


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