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 | |
|---|---|---|
| Purpose | Used for spending | Used for saving |
| Average interest rate | 0.04% average interest | .06% average interest |
| Withdrawal rules | No withdrawal limit | Six per month withdrawal limit (except for in-person and ATM transactions) |
| Additional info | Linked to debit card, paper checks and/or online payments | Can 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:
- Best overall: Capital One 360® Checking Account
- Runner-up: Ally Interest Checking Account
- Best for rewards: Discover Cashback Debit Account
- Best for out-of-network ATMs: Alliant Credit Union High-Rate Checking Account
- Best for students: Chase College Checking℠ Account
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:
- Best overall: Marcus by Goldman Sachs High Yield Online Savings
- Best for checking/savings combo: Ally Online Savings Account
- Best for easy access to your cash: Synchrony Bank High Yield Savings
- Best for earning a high APY: Vio Bank High Yield Online Savings Account
- Best if you want extra help saving: Varo Savings Account
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.
Information about the Synchrony Bank High Yield Savings Account has been collected independently by CNBC and has not been reviewed or provided by the bank prior to publication.
