Are you trying to decide what’s better, checking vs. savings account? Ideally, you should have both. When used responsibly and customized to fit your specific needs, checking and savings complement each other. Combined, they make it much easier to manage your financial health. Here’s why.
Perks of a Checking Account
A checking account allows you to make withdrawals or write checks against a balance that you’ve accrued.
Also called a transaction account, checking makes it easy to pay bills online or through the mail. It also enables you to make in-person purchases with your bank-issued debit card. The money you spend pulls directly from your checking account and doesn’t require any type of minimum monthly repayment.
Checking accounts also don’t accrue finance charges, because you’re not borrowing money. Instead, you’re spending money from an account to which you’ve contributed regularly.
Many people use their checking accounts for direct deposit of their recurring paychecks. As a result, there’s no hassle of picking up a paper check from your workplace, signing the back, and taking the check to a bank to have it cashed. The money is simply transferred digitally from your corporate office to your checking account, where you easily access it using your debit card or by writing a paper check against the balance.
Things to Keep in Mind Regarding Checking
Fees may be associated with your checking account, according to the type of account you open and how you maintain it. For instance, if you keep less money in your account than the minimum that’s required each month, you may incur a minimum balance fee. And if you accidentally overdraft your checking account, you will likely be charged an overdraft fee.
It’s important to pay attention to any fees associated with your checking account because they’re automatically withdrawn from your account by your bank when the infraction happens. This could start a domino effect if you still have checks in the mail that need to clear and fees have eaten up your balance.
If you’re going to open a checking account, make sure it’s one that suits your lifestyle and the way you use your money. Shop around until you find the right one for you. Some checking accounts require you to keep a minimum balance. Others do not. Some accounts charge monthly fees if you don’t make a minimum amount of deposits. Others don’t.
Sit down with a credit union representative and discuss how you would like your checking account to function, so they can help you choose one that helps you meet your financial goals.
Types of Checking Accounts
Many types of checking accounts are available to help consumers make better use of their money. These include:
- Basic Checking
- Interest-Bearing Checking
- Joint Checking
- Business Checking
- Student Checking
- Youth Checking
- Senior Checking
- Money Market Checking
- Rewards Checking
There are others, as well. This is why it’s so important to explore the options available to ensure they meet up with what you’re trying to accomplish. Your checking account can do everything from paying you cash back on gas or restaurant purchases to letting you accrue interest on your balance. Choose the one that offers the most benefits according to how you live.
Perks of a Savings Account
A savings account differs vastly from a checking account, but the two complement each other in the best possible ways.
You can have the bulk of your paycheck directly deposited into your checking account and send the rest to savings. This way, you never really see the money that you’re saving, so it’s difficult to miss it. You can also use your credit union’s online options to transfer money digitally between both accounts. This means if you accidentally overdraft your checking one month, you can make an emergency transfer from savings to cover the oversight.
Your savings account will accrue interest, too, while most checking accounts will not. You can earn money passively simply by building your savings. And some savings accounts, such as those geared toward education or retirement, save you from paying federal taxes on the money you deposit there.
Types of Savings Accounts
There are as many types of savings accounts as there are checking. It’s vital to choose the right one for your situation. They include:
- Traditional Savings
- Youth Savings
- Certificate of Deposit
- High-Yield Savings
- Money Market
- Specialty Savings
These accounts vary in what they do for you, how much is needed to open the account, and whether the money is available for withdrawal right away.
For example, a Certificate of Deposit, or CD, savings account requires you to deposit a sum of money and leave it in the bank for some time, usually months or years. If you make an early withdrawal, you may be subject to a penalty fee. During this time, however, your balance will accrue interest at a higher rate, yielding a bigger payoff at maturity.
At the opposite end of the spectrum, a specialty savings account, such as a Christmas club saving account, helps you save money toward a specific, short-term, or long-term goal. It usually pays less in interest, however.
Deciding Between Checking vs. Savings Account For Your Financial Goals
It’s important to talk with your credit union to discuss your financial goals and what you’d like your checking and savings accounts to do for you.
At Wasatch Peaks Credit Union, we’re always happy to help with your financial growth. Click the button below to see the many options available in checking accounts. You’re bound to find the one that’s perfectly suited to the way you live today while considering how you’d like to live tomorrow.