Difference between a Checking and a Savings Account

Updated on June 27, 2017

Opening a bank account usually requires an individual to choose between a checking or a savings account. This alone indicates that there are significant differences between the two. This article aims to familiarize anyone who is not clear about how a checking account works differently from a savings account.



A checking account, also called a transaction account, demand deposit account, or current account, is a deposit account held at any financial institution, usually a bank. This type of account allows its holder immediate access to the account, including other authorized users appointed by the account owner. The account is accessible in several ways, such as issuing checks, cash withdrawals, and debits using electronic transfer. In economics, funds under this type of account are called liquid funds.

Any business or individual can open a checking account but they are often required to meet several criteria. For example, sometimes account holders are required to deposit paychecks directly into their checking accounts, or to keep a minimum balance. They may also be required to make a minimum number of transactions in a month. Unless these criteria are met, account holders are usually charged monthly maintenance fees. Certain fees also apply should the account holder use another bank’s ATM or when withdrawing more than the available balance in the account.

A savings account is a deposit account which is not allowed to be directly used as money as a medium of exchange such as writing a check or paying for online transactions and automatic bill payments. This type of account allows depositors to set aside part of their liquid assets while accruing interest. Only individuals are allowed to open a savings account.

A savings account holder does not usually get a debit card. Withdrawals can only be done in person at the bank, over the phone, or by transferring funds online to a connected checking account. In most cases, there is a limit on how many times funds can be withdrawn. The limit is usually three to six withdrawals in a month. However, an account holder may make deposits as many times as he/she can. The whole concept of a savings account lies in saving money for longer periods in order to earn interest. Funds should only be used in times of emergency or when paying for big ticket items such as a car or house.

Checking vs Savings Account

So what’s the difference between a checking and a savings account? A checking account is a deposit account that can be acquired by any individual or business organization from any bank or financial institution. In contrast, a savings account can only be set up by an individual at a retail bank.

A checking account is designed for making everyday purchases and spending. It can be can be used to issue checks, pay bills online, withdraw funds from an ATM, and pay for groceries. A savings account, as the name suggests, is meant for saving money and emergency purchases or payments. A checking account does not usually earn interest while a savings account accrues interest over time.

Comparison Chart

Checking AccountSavings Account
For businesses and consumersOnly for consumers
Designed for regular spending and paymentsDesigned for saving money
Does not usually earn interestEarns interest over time
Comes with debit cards for ATM withdrawalsDoes not usually come with debit cards; withdrawals are done by phone, over the counter, or by transferring funds to a connected checking account


Here’s Kal Penn talking about how checking and savings accounts differ.