The proper choice of banking products must be focused on their usefulness for our personal finances. Due to ignorance, there is a tendency among users of not being able to differentiate between a checking or checking account and one savings account.
- How does a savings account work?
- Description of a checking or checking account
- Reasons to have a checking and savings account
Therefore, we clarify this confusion so that you are aware of how each one works.
How does a savings account work?
In the United States, unlike Latin countries, financial instruments have a specific purpose according to personal needs.
Regarding the savings account, not intended for everyday use but to constantly save money, earn interest and have funds for both projects and emergencies.
For this reason, we can establish that they have some main attributes:
They are not to spend. As we have clarified, a savings account It is not designed for you to use it for your daily or regular consumption. In fact, they will not offer you a debit card or a checkbook for common operations.
This instrument comes with the limitation of 6 transactions per month, such as transfers and withdrawals that are not in any bank headquarters.
Less commissions. Through savings accounts, banks earn money through what is known as a spread or spread. It is the result of the interest they charge for lending your money and the dividends they pay to you.
These banking products are easier to manage and maintain, they include less fees or commissions so that you can enjoy their services.
Pay interest. Although the dividends generated by the interest rates on these accounts are not great, they do serve to accumulate a little more over time.
If you search calmly, you may find an APY of at least 2%, an improvement brought on by increases from the Federal Reserve. That is why it is important that you compare your options to choose the best alternative.
Long-term investment. In the minds of banks, savings accountThey function more as an investment instrument than as a current expenditure. This is because you are giving them access to your money for a longer period, which allows them to lend it and make a profit.
Hence the incentives and restrictions for you to leave that money alone and accumulate as much as you can.
Description of a checking or checking account
Unlike the previous ones, checking accounts are designed so that you can manage your money quickly and conveniently. It is considered an instrument for daily use, which normally does not generate interest and offers greater facilities to carry out different types of transactions.
It stands for:
Its transactional nature. This means that banks enable checking accounts for people to manage their money quickly, frequently and with few restrictions in terms of time or number of operations.
That is why they usually include a checkbook, debit card, apps for your favorite devices and programs like Zelle or other similar services. This facilitates own payments or to people of other entities.
They do not usually pay interest. Although most of the checking accounts Traditional do not pay dividends, there are institutions that do offer this benefit. On average, you can get an APY of 0.04% or even up to 1.25% if you consider an online-only option.
What we want to limit is that usually these products will not generate more interest than a savings account.
Include a variety of commissions. These instruments are characterized by having an extensive list of fees associated with services or omissions of account holders. It is not uncommon for you to be charged for overdrafts or insufficient funds (overdraft), lower the minimum balance, use an ATM from another bank, maintenance, etc.
Banks apply these commissions because the greater number of operations requires more administrative expenses and they cannot lend your money either because the speed of consumption is faster than with a savings account.
Reasons to have a checking and savings account
It is quite common for your bank to offer you a free savings account to accompany the checking account you already have. The idea behind owning both products is simple: supplement the limitations of each.
This way you can mobilize your money more efficiently and at the same time have a cushion for unforeseen situations or future plans.
Of course, instead of a savings account, you can opt for a certificate of deposit or one money market account, which have better interest rates. If you do not want to run the risk of spending all your funds to have a single account, it is preferable to diversify.
In addition, having a set aside money that you do not plan to touch regularly, can help you with the lack of liquidity.
If you want to know which savings or checking accounts are the best valued by users, be sure to visit our search engine / comparator Hispanic Business Blog.