We all require bank accounts. Our bank accounts are where we keep all of our money and where we can optimize it. You can choose from a variety of accounts, including checking, savings, and salary accounts. The decision to open a Checking Account or a Savings Account is primarily influenced by two factors: the purpose of the account and the level of accessibility required. To grasp the distinction between a checking and a savings account, we must first comprehend the meanings of both accounts.
What is a checking account?
A checking account is a type of bank account used to pay for daily costs. These accounts are simple to use and do not have any restrictions on withdrawals. You can use the account to pay bills, make online purchases, and carry out other routine operations. When you open this account, the bank gives you a debit card, a checkbook, and a passbook. You can also use online and mobile banking to access your money from anywhere at any time. Checking accounts, on the other hand, do not offer much in the way of interest.
What is a savings account?
A savings account allows you to save money and develop your capital by depositing funds into it on a regular basis. It’s a place where you can put money that you don’t need right now. Savings accounts, unlike checking accounts, have a few limitations on how they can be used. For example, you may only withdraw money from banks and ATMs a set amount of times each month. Your Savings Account comes with a debit card, passbook, checkbook, and internet banking, much like a Checking Account. Unlike the Checking Account, however, the Savings Account pays out interest semi-annually or annually on cash deposited.
Difference between savings and checking account
Most transactions carried out through your Checking Account are subject to a fee — ATM fees, overdraft protection fees, overdraft fees, online access fees, and so on. A Savings Account, on the other hand, is virtually completely fee-free. A bank will only charge you a fee if you exceed your money withdrawal limit or fail to meet the bank’s minimum balance criteria.
Frequency of Usage:
You can make as many deposits and withdrawals as you like from your Checking Account. There is no restriction on how many transactions you can make every day, and there is no limit on how much you can deposit or withdraw. Savings Accounts, on the other hand, have limitations on the number of times you can withdraw money from banks and ATMs. If you go above the 3-5 transactions per month limit, you’ll have to pay extra fees to use other bank ATMs.
Frequency of Transactions:
You must conduct at least one transaction per month if you have a Checking Account. Your bank will charge you a monthly maintenance fee if you do not comply. If you have a Savings Account, you can make a transaction once every six months to keep it active. The bank will classify your account (and the debit card associated with it) as dormant if there is no activity on it.
The major distinction between the Checking and Savings Accounts is the interest rate offered. On Checking Accounts, banks often pay little to no interest. You earn interest on your contributions in a Savings Account. Interest rates vary by bank and are mostly determined by the type of Savings Account you open and the amount of money you deposit.
Benefits of savings account
Quick & easy financial transactions
As previously said, the main purpose of having a Savings Account is to manage your gains, i.e. sending and receiving money. Your Savings Account serves as the cornerstone for all financial transactions, decreasing your cash reliance.
These transactions can be completed quickly and conveniently using financial services such as net banking, ATM-cum-debit card, check, or even a cash withdrawal slip. Banks are also providing dedicated bill payment services, allowing customers to set up standing instructions for paying utility bills including energy, water, and phone, among other things.
In India, every Savings Account pays a rate of interest that ranges from 3% to 7%. This rate is controlled by the Reserve Bank of India’s repo and reverses repo rate decisions, which vary by bank. Customers can profit from their deposits and save money over time by earning interest.
ATM & Debit card facility
The bank issues an ATM/Debit Card to every Savings Account customer. This card can be used to withdraw money from ATMs, make purchases in stores, and even make online payments using a payment gateway. If you need money straight soon, you can either go to your bank’s ATM or go to another bank’s ATM to get money.
Benefits of checking account
You can get your money from a checking account in a variety of ways. To spend or withdraw money, you can go to a bank, use your debit card at an ATM, write a cheque, or make an internet transfer.
A checking account keeps track of your deposits and expenditures, allowing you to understand where your money is coming from and going. Furthermore, certain checking accounts allow you to lock your debit card if it is ever lost or stolen, preventing unauthorized use.
Some checking accounts pay interest, so your money might grow even if it’s just sitting in the account.
How do you pick the right checking and savings account?
Check the interest rates
Consider the bank’s interest rates on both checking and savings account interest rate. PSU banks typically offer lower interest rates with annual interest payments. Whereas private sector banks typically offer somewhat higher interest rates with semi-annual interest payments.
Check the required minimum balance
Checking and savings accounts have various minimum balance requirements at each bank. Checking accounts require greater amounts, whereas savings accounts can have balances ranging from INR 500 to INR 100,000, depending on the account type.
You can open your chosen account now that you understand the differences between checking and savings accounts. The final decision to enroll in one of the two accounts is based primarily on your needs and what you want to gain from them. There is no restriction that states you can’t have both accounts open at the same time. Remember to weigh the benefits and drawbacks of both accounts before deciding which one to use for your banking requirements. Just like you would with any major life decision.