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Checking Account vs. Savings Account
It’s not very clear to everyone which one is more valuable and useful especially when you are just new to banking. Many are still oblivious of what is the difference between opening a checking and a savings account. Let’s look into details to help you compare and decide which type of account is better than the other and how both accounts benefit you.
It is considered to be money for everyday needs. Checking accounts allow you to access your money whenever and wherever you need it. It’s designed to make your transactions way easier and relatively convenient as you are given debit card and checks when you open a new account.
You can use it to pay bills online, everyday purchases in stores, paycheck direct deposit and cash withdrawals using debit card.
Types of Checking Account
There are some types of checking accounts including regular (basic) accounts, premium checking accounts, student checking accounts, senior citizen checking accounts, interest-bearing accounts, business checking accounts, and rewards checking accounts.
The most common account is the regular (basic) checking account that has all the features you’d expect in a checking account however premium accounts offer more perks but usually require account holders to maintain high balances.
Importance and Advantages of Checking Account
Having a checking account is important as you can perceive this type of account as foundation of your financial life. If you have a checking account you are likely extending yourself a gateway to an easy and less costly financial life. Less costly because if you have a checking account and you receive a check you don’t have to look for banks that accepts personal check that often charges you fee for cashing it, you can just simply visit your local branch or use a mobile app.
This means that having a checking account is such an advantage as managing all your finances are easily done at home when you have digital access to your financial institution.
Disadvantags of Checking Account
Considering the convenience in having a checking account it is really encouraging to open an account however having one also bears a major drawback which is the potential of fees, some banks charge monthly maintenance fee, minimum balance requirement fee, ATM fees, and overdraft fees.
Nevertheless, account holders can avoid the monthly fee by using direct deposit or making a certain number of debit purchases every month and have the bank wave the fee.
It is designed for saving money. Savings account functions as holder of money for your long term needs or much larger goals. Compared to checking account which is more convenient and useful in everyday purchases savings account is mainly for keeping your money over a long period of time. This type of account accrues daily interest and credited to your account monthly as your money sits in a bank over time. A passbook or statement to record your transaction is usually given by the bank as you open your savings account.
Advantages of Savings Account
As saving money is vital in many ways having a savings account means you have your financial security and freedom for bigger future purchases or goals. It is necessary to separate your money for savings goal and daily purchases to avoid losing sight of it and over spending.
Aside from getting compounded interest you can also embrace your financial protection.
Disadvantages of Savings Account
Interest earned in savings account is typically low. You can possibly lose due to inflation, when the interest rates are less than 2% you are losing purchasing power by keeping your money in a savings account. A withdrawal limit is also set by the government for savings account to 6 per statement cycle (month) while transfer of money into your account is unlimited.
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