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Checking vs. savings accounts: What's the difference?

Putting your paycheck in a jar that sits on your shelf isn’t feasible when your earnings increase beyond birthday money and chore allowance. At some point, you’ll need a bank account. That said, let’s take a look at two common options: the checking account vs. savings account.

Learn the purposes of checking vs. savings accounts, as well as how you can use them in tandem to conduct financial transactions and build long-term savings.

What is a checking account?

A checking account is a type of deposit account that’s held at a traditional bank, online bank or other financial institution that allows regular deposits and withdrawals. Its main feature is providing you easy access to your money by way of debit cards, checks and ATMs. Because of this, a checking account is usually your go-to account for daily expenses, such as paying for groceries, Wi-Fi and rent.

With a checking account , you can easily set up direct deposits and receive wire transfers from any U.S. bank. Ally Bank offers early direct deposits  on eligible direct deposits, as well as overdraft protection, among other features.

Some checking accounts (such as the Ally Bank Spending Account) also pay interest on the account balance. The annual percentage yield, or APY, on an interest-earning checking account is typically lower than a savings account.

What is a savings account?

A savings account is an interest-bearing deposit account that’s also available via a traditional bank, online bank or another financial institution. With a savings account, you can also set up direct deposits and receive wire transfers from any U.S. bank.

Ally Bank’s Savings Account can help you save smarter and faster than ever. Savings accounts usually accelerate your savings (including your emergency fund) because they tend to pay higher interest rates than checking accounts. And Ally Bank's also comes with savings-boosting tools .

With savings accounts, you have less access to your money than with checking accounts. Many savings accounts don’t come with checks or a debit card, and you may be limited to in the number of withdrawals or transfers you can make in a month. (Exceeding the limit may result in having to pay a fee.)

Checking vs. savings accounts

What is the difference between checking and savings? Compare the checking and savings accounts at Ally Bank side by side to decide which type of account works for your needs. 

Ally Bank Spending Account

  • Primary use: Access money for daily use

  • Withdrawal limits: No limits on withdrawals

  • Features: Early direct deposit, CoverDraftSM, spending buckets , FDIC-insured, among others

  • Fees: No fees for maintenance, low balance, overdraft, ACH transfers, incoming wires or cashier’s checks. No fees for AllPointSM ATMs and reimbursement up to $10/statement cycle for fees at other ATMs nationwide. We do have fees for expedited delivery, outgoing domestic wires, account research and excessive transactions. However, we're currently refunding excessive transaction fees.

  • Interest: Pays interest at a competitive rate

Ally Bank Savings Account

  • Primary use: Set aside money for longer-term goals

  • Withdrawal limits: Limit of six withdrawals per statement cycle, however, we are currently refunding fees associated with withdrawals or transfers over the limit

  • Features: Savings buckets and boosters, personalized recommendations, competitive rate, FDIC-insured, among others

  • Fees: No fees associated with maintenance, minimum balance, overdraft, ACH transfers, incoming wires or cashier's checks. We do have fees for expedited delivery, outgoing domestic wires and account research

  • Interest: Pays interest at a competitive rate

If you’re in need of a checking account, don’t be too quick to open the first one you find. Think about what’s most important to you (no fees, ATM access) and how you deposit and spend money. For instance, at Ally Bank, we offer CoverDraft  and do not charge overdraft fees . (Keep in mind, CoverDraft isn't a line of credit or a guarantee. If your purchase isn't covered for any reason — let's say the transaction exceeds your CoverDraft limit, for example — it will be declined, but we'll never charge you an overdraft fee.) Here are a few other items to check for:

  • No minimum opening deposit

  • No monthly maintenance fees

  • Access to nationwide AllPoint ATMs for free

  • FDIC insurance protection

If you want your checking at your fingertips, look for an account with secure mobile banking features like remote check deposit and the ability to transfer funds using a mobile payment service. Zelle® is a payment network that works within the apps of many banks, including ours, to send money to friends and family. 

Consider taking the same thoughtful approach when considering savings accounts.  Try to not get overwhelmed by the various offerings and focus your attention on the following benefits: 

  • Competitive Annual Percentage Yield (APY) — the higher the APY, the more potential to grow your savings

  • No minimum balance requirement

  • No monthly maintenance fees (or easy ways to avoid them)

  • FDIC insurance protection

Is money safe in checking and savings accounts?

Have you ever wondered whether your money is safe in the bank? 

Money in an FDIC-insured bank such as Ally Bank is insured up to $250,000 per depositor and per qualifying account ownership category (including principal and accrued interest).

Should one account be used over the other?

Should you open a checking and savings account? What about opening them with your partner? Choosing how much you should allocate to your checking account or savings account depends on your financial needs.

For instance, if you’re looking to save for several things, like an engagement ring, a new exercise bike, a camping trip or building up an emergency fund , putting the money in a savings account probably makes the most sense. (Our savings buckets tool can help you keep your savings organized all within one account.) Keep your money in savings — earning interest — then transfer it to a checking account once you’re ready to make a purchase or need the funds.

But for your regular, everyday expenses, a checking account is likely the best option.

Alternatives to regular savings accounts

What alternatives might you consider over checking and savings accounts? You may want to consider either a money market account or certificate of deposit (CDs).

  • Higher-yield money market account: Money market accounts are a lot like a savings account with limited check writing privileges. You can earn a variable interest rate, possibly more than you'd receive from regular savings accounts. Learn more about money market vs. savings accounts.

  • Certificates of deposit (CDs): traditional bank CD is an interest-bearing deposit account in which you agree to keep your deposit in the CD for a set period of time. A CD has a fixed term length and a maturity date when you can withdraw your money penalty-free and any interest you receive. 

The bottom line

It’s beneficial to have both a checking account and a savings account. An Ally Bank Spending Account will help you manage and pay for everyday expenses, while an Ally Bank Savings Account can help you save for your future.

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