You’re at the ATM, making a withdrawal and the pesky machine asks “Checking or Savings?” You think to yourself, “good question!”
The purpose of a savings accounts is to save money. Savings accounts usually pay a higher interest rate and most of the time the rates are determined by the amount in the account. But that depends of the credit union or bank. Savings accounts have a limit on the number of withdrawals that can be taken each month (federal law known as “Regulation D” limits customers to six withdrawals and transfers per month). There are no limits on the number of deposits that you can make. With savings accounts, you can only take out the amount that is in the account (no overdraft on savings accounts). Savings accounts may have a minimum balance requirement and most of the time the balance in the account determines if there will be fees or not. Again this all depends on the credit union or bank. So shop around!
The purpose of a checking account is to be used to deposit cash and checks. For your convenience they also offer Bill Pay, which makes it so easy to pay your bills each month. Most of the time you do not earn interest on checking accounts, it all depends on the credit union or bank and the type of account. There may be some exceptions. Checking accounts do not have limits on the number of withdrawals or deposits that can be made to them. You have the option of getting a debit card, which makes it easier to access your funds. If you have opted in for overdraft protection you can withdraw more money from your account than the balance in it (usually by $500.00). Checking accounts can have fees for ATM, overdraft protection, and online bill payment, depending on the credit union or bank. Many checking accounts come with additional perks and benefits. For example, my checking account at my credit union has purchase rewards. I earn cash back for using my debit card at certain merchants! It’s always a nice surprise to get an unexpected deposit into my account! 😉
To put it simply, your savings should be acquiring interest and your checking should be used for everyday purchases.