In order to make your checking and savings accounts work for you, you’ll need to understand the difference between a checking account and a savings account.
Take a snapshot of your banking portfolio. Two accounts should jump out at you -- checking and savings. Both are important components of your financial health, but the two accounts are not interchangeable. In order to make each account work for you, you’ll need to understand the difference between a checking account and a savings account. Knowing the benefits and limitations of each type of account will help you successfully allocate your money and earn interest while your funds are in the bank. At Muncy Bank, we want to make sure you are getting the most out of your financial accounts. Let’s break down the difference between checking and savings.
What is a checking account?
Checking accounts are designed to be temporary holding accounts for your money. This is the account you want to pay your bills from and link to a debit card. You may choose to directly deposit your paycheck into your checking account and schedule your mortgage, credit card, and utility bill payments from this account. Some checking accounts even pay interest if you keep a minimum balance. Checking account benefits include the following:
- Secure and FDIC insured
- Direct deposit
- Online bill payment
- Debit card convenience
- ATM access for easy withdrawals
What is a savings account?
Anytime you can spend less than you are earning, you should secure those extra funds in a savings account. Beyond the traditional savings account, there are other types of accounts to help you save, such as money market accounts, CDs, and IRAs. The amount of money needed to open these accounts and the accessibility of the funds varies. Benefits of a simple savings account include:
- Secure and FDIC insured
- Interest earning
- Low risk
- Small opening deposit
Can I make payments from my savings account?
The biggest difference between savings and checking accounts is the ability to tie a debit card and bill payment service to a checking account. Does that mean you can’t take your money out of a savings account? Absolutely not! If you need to tap into your savings you can transfer money to your checking account and withdraw money from an ATM. Online banking makes transferring funds between accounts fast and simple.
How does savings account interest work?
Although interest-bearing checking accounts have increased in popularity, saving accounts allow you to keep your “extra” money separate from your bill paying account and help you save for a rainy day. Some savings accounts offer tiered interest, pay different interest rates for different balances and may require a minimum balance. This means that you’ll earn a higher rate of interest if you keep a larger amount of money in the savings account. A Muncy Bank savings account pays interest on your balance over $100 and there is no fee if you maintain a $100 balance.
When determining how much interest you’ll earn in a savings account, look at the account’s stated APY. APY stands for annual percentage yield. The interest compounds each month throughout the year growing your money while keeping it safe for the future.
How do I start a savings account?
Opening a new checking or savings account is simple. A trustworthy local bank can help you with every step of the process and answer any questions you might have. At Muncy Bank, we take the time to make sure our customers are fully informed about their accounts and all of their banking options. If you aren’t getting the most out of your finances by maintaining both a checking and savings account, now is a great time to start! Contact our knowledgeable employees via email or phone, or visit one of our convenient locations in Muncy, Hughesville, Clarkstown, Montoursville, Dewart, Avis, Montgomery and Linden. We look forward to helping you set up your new savings account!
Read more about savings accounts in "How To Build A Budget And Save Money."