Checking and savings accounts: How they work (and how to use both)

Bank accounts are essential tools for your financial life, whether getting paid, spending on needs, or saving for the future. Checking accounts and savings accounts both have key functions in money management. You might wonder: When should I use a checking versus savings accounts, and what are their key differences?

Think of a checking account as your day-to-day money hub and a savings account as your “set it aside” account for goals and surprises. Knowing how a checking versus savings account works can help manage your financial needs.

What is a checking account?

A checking account is an account built for regular financial transaction needs. It’s designed to help you manage everyday spending and money movement — getting paid, buying everyday needs, paying bills, and sending money. It’s called a checking account for the ability to write checks.

Check writing is less common now because we can move money digitally, but a checking account is still a primary tool for depositing and spending money. (If you do need to write a check, this step-by-step guide can help.) While still referred to as a checking account, there are also checking accounts that do not offer check writing services, but still allow customers to access their funds and make transactions using their debit card.

Why a checking account still matters

Here are four main reasons to open a checking account:

What is a savings account?

When comparing a checking and savings account, savings is usually better suited to store money for future goals. Your savings represents money that you don’t plan to spend right away, while keeping it accessible for when you need it. Savings accounts typically earn interest, which means your balance can grow over time.

Types of savings accounts

Banks may offer different savings-style accounts, such as:

• Traditional savings: Simple and widely available; interest rates are often lower than other types of accounts.
• High-yield savings: Typically pays a higher interest rate than a traditional savings account; often offered by online-only banks.
• Money market account: May offer higher rates than traditional savings accounts and sometimes have limited check-writing or debit access; may require a higher balance than a savings account.
• Certificate of deposit (CD): Often pays more interest than a traditional savings account if you leave money untouched for a set time; early withdrawals may have a penalty.

Checking vs. savings: When to use each

Here’s a common way to decide: checking is for spending, and savings is for setting money aside.

Consider using a checking account for:

• Paying bills and subscriptions
• Everyday purchases (in-store and online)
• Rent and utilities
• Sending money and transfers
• Getting paid via direct deposit

Consider using a savings account for:

• Emergency savings
• Planned bigger-than-usual expenses
• Saving for goals
• Keeping goal money separate from spending money
• Earning interest on your money while it sits idle

What to look for when choosing a checking or savings account

Before you open an account, compare the basics across different banks and specific accounts. Focus on costs, convenience, and the tools you’ll actually use.

For checking accounts, consider:

• Monthly maintenance fees (and how to waive them, if possible)
• Overdraft options and overdraft fees
• ATM access and out-of-network ATM fees
• Mobile banking tools (alerts, mobile deposit, tools)
• Whether checks are included (if you need them)

If you want a low- or no-cost checking account, Bank On shares a list of bank accounts that meet standards for low costs and modern features. You can browse options by state or by bank name.

For savings accounts, consider:

• Interest rate (Annual Percentage Yield, or APY)
• Minimum balance requirements
• Monthly maintenance fees
• Withdrawal or transfer limits/fees
• How easy it is to move money between savings and checking accounts

How to open a checking or savings account

Most banks ask for similar information to verify identity and help prevent fraud. Requirements vary, but commonly include:

• Your name
• Date of birth
• Your Social Security number or Taxpayer Identification Number
• A government-issued photo ID
• Proof of physical address (such as a lease or utility bill)
• Possibly a minimum opening deposit

What you need to open a bank account can vary slightly by bank, so check the bank’s website or call ahead to confirm what they require and what fees apply. You can usually visit a bank branch to open an account, or you might be able to open it online. Knowing what you need to open a bank account ahead of time can make the process quicker and less stressful.

Bringing it all together

Checking and savings accounts are simple tools, but they’re powerful when you use them with intention. Use checking for the money you spend, savings for the money you’re building, and watch fees and overdraft settings so your account works for you. A solid first move: open both accounts and set up a small automatic transfer to savings.