What's the difference between a checking and savings account?

Opening a bank account is often one of the first steps to starting your financial life. There are two main types of bank accounts: checking accounts and savings accounts.

There are a few differences between a checking and a savings account. Mainly, checking accounts are meant to be used for spending money, while a savings account is generally where you keep funds for future goals or purchases.

Below, CNBC Select reviews how checking and savings accounts compare and we provide our top picks for checking and high-yield savings accounts.

A checking account is generally used for making payments, and the most common form of payment has historically been paper checks. Nowadays you can also make payments via electronic wire transfers or with a debit card that links to the account.

Unlike credit cards, which you have to apply and get approved for, anyone with a checking account can request a debit card. Debit cards look like credit cards, but they link to money you already have in the bank as opposed to borrowed money, the way credit cards do. Debit cards and credit cards also come with different levels of fraud protection, and unlike credit cards, very few debit cards earn rewards. (Read more about the differences between debit and credit cards here.)

Since checking accounts are transactional, meaning they process incoming deposits and payments, many have monthly fees of around $15. However, these costs are often waived if you fulfill one or more of your bank's requirements. 

Here are a few ways you can typically get your checking account fees waived:

• Maintain a minimum balance
• Set up direct deposit from an employer
• Make a minimum number of transactions per month
• Be a student or under the age of 25

You generally don't earn much interest on the money you keep in your checking account, and that's one reason why many people keep enough funds for monthly expenses and keep the rest in a different location that earns them more interest.

Checking accounts are often an affordable, convenient and secure way to store your money, receive paychecks and pay your bills. If you find yourself paying high monthly fees, it's worth doing your research to find a more affordable option.

The Capital One 360 Checking® is a great option for those who prefer to bank on their phone. It has an intuitive mobile app and got the highest rank in J.D. Power's 2024 U.S. Banking Mobile App Satisfaction Study. The account has no minimum to open, no overdraft fees and Capital One has many physical locations if you prefer to speak to someone in person.

Another checking account that may be a good fit is the Ally Bank Spending Account which offers you access to over 43,000 fee-free Allpoint ATMs, and even reimburses up to $10 per statement for out-of-network ATM fees. You can also get paid up to 2 days earlier using direct deposit, and the account has no monthly maintenance or overdraft fees.

While checking accounts are for spending, savings accounts are meant to keep money safe that you don't immediately plan to spend. Before 2020, the Federal Reserve restricted users to only six withdrawals or transactions from your savings account every month, now this varies based on your financial institution.

In addition, savings accounts don't usually come with checks or debit cards, though they have a routing number that you can use to send or receive money electronically. You can also link your savings account to your employer's payroll and auto-deposit a portion of your paycheck every month.

Traditional savings accounts will almost always earn you more interest than a checking account because you're letting your bank hold onto your money for an extended period. For the time your cash sits in the account, banks use it to finance their investments and lending. While they share a small portion of their earnings with you, this still earns you considerably less than other options.

For many people, it's worth looking for a savings account with a higher interest rate, called an annual percentage yield (APY).

High-yield savings accounts help your money to grow even faster as it sits in your account. Though APY can go up or down as the Federal Reserve changes its benchmark interest rate, the highest-yielding accounts can still earn you roughly 10X more money than regular savings accounts.

The money in your savings account is federally insured by the Federal Deposit Insurance Corporation (FDIC). This means that deposits up to $250,000 are protected if the bank were to go under.

The Western Alliance Bank High-Yield Savings Account offers a competitive interest rate and is great for newer users as it only requires $1 to open an account and has no monthly fees. The account also offers no limit to the amount of interest you can earn.

If you're looking for easy access to your funds, the Marcus by Goldman Sachs High Yield Online Savings offers unlimited withdrawals or transfers for your high-yield savings account. The account also comes with no minimum deposit requirement or fees.

At CNBC Select, our mission is to provide our readers with high-quality service journalism and comprehensive consumer advice so they can make informed decisions with their money. Every article is based on rigorous reporting by our team of expert writers and editors with extensive knowledge of financial products. While CNBC Select earns a commission from affiliate partners on many offers and links, we create all our content without input from our commercial team or any outside third parties, and we pride ourselves on our journalistic standards and ethics.

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