How do I compare a checking account to a savings account?
Some young women tell us they don’t know what kind of account they should have (or currently have!). NO PROBLEM. The simplest break down is this:
Checking and Savings accounts are used for different purposes
Open Checking to:
Park money that you need constant access to
Get a debit card to spend with or to withdraw cash at ATMs. (Reminder: the debit card is tied to the checking account so you can’t use more $ than you have in the account)
Have a checkbook for bills that require you to write a check
No major limits on when you can withdraw your $. But because of how flexible the account is, banks usually don’t pay any interest on a checking account. Whereas…
Open Savings to:
Earn a tiny interest to help your money grow a tiny bit on its own each month (but remember, basic savings account typically only pay 0.1% interest, basically nothing)
Put away money you’re restricted from touching too often, which helps you be disciplined. You won’t have a checkbook or debit card with it either, so can’t spend out of this account easily. Forcing mechanism for yourself!
Once you’ve decided which is better for you right now:
Compare different CHECKING accounts your bank offers, and make sure there are:
No monthly fees
No (or LOW) overdraft fees (for when you accidentally try to use more $ than you have in the account) ← that’s 100% your bad, but you can try to minimize the penalty
No fees for ATM cash withdrawals
Compare different SAVINGS accounts your bank offers, and make sure there are:
No monthly fees
The highest interest rates (ideally at least 1% or higher; recall most only pay 0.1%)
Minimum balance requirements that you can handle (meaning, don’t choose one that requires $5000 in the account at all times if you can’t maintain that)
By the way, if any accounts ever do have fees, tell the bank you’re a student and ask if they’ll waive them while you’re in school. Many banks do, so ALWAYS ASK.
If you're looking to pick a type of Savings Account - yup, there's more than one kind - don't sweat it, we break down the main 3 here.