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Here's when you should put money in a checking account vs. savings account

Checking and savings accounts have two different purposes. CNBC Select compares the two types of bank accounts and gives our top picks for high-interest savings accounts.

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Opening an account at a bank is one of the first things you do to start your financial life, and many people have accounts from childhood. Frequently, banks will offer joint checking and savings accounts so you can have all your money in one place.

Both checking accounts and savings accounts have routing and account numbers so you can both send and receive money in the form of bill payments, paychecks, wire transfers and other electronic deposits. If your checking and savings accounts are linked, you can see both balances when you log into your bank account online.

But there are also 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 has federally-regulated limits on how often you can take cash out every month.

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

Quick facts: Checking vs. savings accounts

Checking account Savings account
PurposeUsed for spendingUsed for saving
Average interest rate0.04% average interest.06% average interest
Withdrawal rulesNo withdrawal limitSix per month withdrawal limit (except for in-person and ATM transactions)
Additional infoLinked to debit card, paper checks and/or online paymentsCan be used as overdraft protection for a checking account

What is a checking account?

Like the name suggests, a checking account is generally used for making payments. The most common form of payments has historically been paper checks, but nowadays you can make payments via electronic wire transfers or with a debit card that links to the account. (You can still order paper checks, but sometimes you have to pay for them.)

Debit cards look like credit cards, but they link to money you already have in the bank as opposed to borrowed money. Debit cards and credit cards also come with different levels of fraud protection. (Read more about the differences between debit cards and credit cards here.)

Since checking accounts are transactional (meaning they process incoming deposits and payments), many have monthly fees of up to $20. However, these costs are waived if you fulfill one or more of your bank's requirements. 

Here are a few ways you can 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 interest on the money you keep in your checking account, and that's one reason why it's not smart to leave a lot of cash in your checking account.

It all depends on your bank, but checking accounts are more often than not an affordable, convenient and secure way to store your money, receive paychecks and pay your bills. If you do find yourself paying high monthly fees, it's worth doing your research to find a more affordable option.

CNBC Select analyzed and compared dozens of checking accounts offered by online and brick-and-mortar banks and credit unions that charge zero monthly maintenance fees. 

Here are our favorites:

Don't miss: 7 common fees of checking accounts and how to avoid them

What is a savings account?

While checking accounts are for spending, savings accounts are meant to keep money safe that you don't immediately plan to spend. There are federally-regulated standards to limit consumers to making only six withdrawals or transactions from their savings account every month. 

In addition, savings accounts don't usually come with checks or debit cards, though they still have a routing number that you can use to send or receive money electronically. You can link your savings account to your employer's payroll and auto-deposit a portion of your paycheck every month. If you use your account's routing number for bill payments, it will count toward your six-withdrawal limit. 

Traditional savings accounts earn a bit more interest than a checking account because you're letting your bank hold onto your money for an extended period of time. While your cash sits in the account, banks use it to finance their investments and lending. They share a very small portion of their earnings with you.

However, it's worthwhile to look 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 over 16X 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.

CNBC Select ranked the five best savings accounts with higher APY than traditional ones.

Here are our top five picks:

Don't miss: 6 tips for choosing the best checking account

Bottom line

Savings accounts and checking accounts have many similarities, but they are meant for two different purposes. Before you sign up for a savings or checking account, double check for monthly fees (and ways to waive them) and look for high-APY options that help you earn more money over time.

Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.