The different ways checking and savings accounts can help you meet your financial goals

This content is sponsored by PenFed Credit Union, federally insured by NCUA.

No matter how you choose to spend your money, it’s good to make sure that you’re enjoying some of the big-picture benefits that come with checking and savings accounts with your financial goals in mind.

Overall, the difference between checking and savings accounts is that checking accounts are generally used for everyday spending while savings accounts are generally used to stash cash away and grow money through dividends earned.

Checking accounts are often used for regular transactions and associated with a debit card that can help you make everyday purchases and ATM withdrawals. With the adoption of online and mobile banking, you can now check your accounts, review recent transactions, schedule bill payments, deposit checks, and so much more. You can also securely link your checking and debit cards to your smartphone to make easy contactless payments. There are different types of checking accounts, such as free checking accounts or high-yield checking accounts that can lead to differing dividends earned.

Savings, on the other hand, are better for storing money and helping grow that fund through dividends earned.

If your goal is to use a bank account for daily transactions, a checking account is a great option. You can often choose between a no-frills free checking account or a high-yield checking account. The high-yield option offers a higher-than-average annual percentage yield compared to traditional checking accounts, however, they often have minimum balance requirements and fees associated with them, Business Insider pointed out.

There are many factors that should be considered when choosing a checking and savings account. One of the important ones is finding a free checking account. Free checking means there is no minimum balance or limit on number of transactions, no regular transaction fees or service fees and no withdrawal or transfer fees, the experts at PenFed Credit Union said.

“If an account simply offers you ways of avoiding fees depending on your account usage, then it’s not legally considered a free checking account,” PenFed’s experts said. “Don’t be afraid to shop around before opening your account. From truly free accounts to accounts with minimal fees, there’s certainly something out there that is sure to meet your specific needs.”

Free checking offers the same features and services on a daily basis as regular checking without the fees. Free checking can also mean simplicity and flexibility by being able to withdrawal and pay into the account and move money around without rules and penalties.

“There’s no reason to pay for a service if you can get it for free. It might take a little research to find the right bank or credit union for you, but the savings and flexibility you’ll get from free checking will make you glad you switched,” the experts at PenFed noted.

Savings accounts allow users to earn interest and grow their money.

“If your goal is to build your savings, savings accounts are often far better places to keep your money than checking,” said Forbes. “A savings account is the ideal place for money you don’t need to spend right now but can’t afford to lose. This makes them good places to keep things like your emergency fund and down payment on a house.”

When it comes to choosing a savings account, the best ones have strong interest rates, no monthly fees and offer easy online bank transfers, Nerdwallet said.

And be on the lookout for other lurking fees associated with savings accounts, NerdWallet warned.

“Some accounts charge for taking some types of withdrawals, such as online transfers, too frequently,” NerdWallet said.

Search for a savings account that fits your goals and banking habits, Forbes recommends. Compare accounts at various banks as well as credit unions to find what works best for you.

Remember that interest rates on checking and savings accounts can fluctuate higher or lower, Forbes noted.

“When the Federal Reserve raises interest rates, your interest rate will likely increase—eventually. You’ll probably see your yield drop if the Fed lowers interest rates,” Forbes said.

The good news is that you don’t have to choose between a checking or savings account – it’s often a good idea to have both of them to help you meet your financial goals. NerdWallet notes that having both accounts at the same bank or credit union can make it easier to manage your money and can simplify transfers. Some of the banks and credit unions also waive monthly fees if you link checking and savings accounts.

However, you may not find the best checking and savings accounts at the same bank or credit union. In that case, NerdWallet recommends opening a separate high-yield savings account at a different bank.

Read more about checking and savings accounts on PenFed Credit Union’s website. PenFed Credit Union is federally insured by NCUA. To receive any advertised product, you must become a member of PenFed Credit Union.

Federal News Network Logo

More from WTOP

Log in to your WTOP account for notifications and alerts customized for you.

Sign up