Opening a checking and savings account is a significant step into adulthood. A checking account is useful for paying bills and a savings account is useful for planning for the future. There are many advantages and disadvantages of each type of account. Before opening either accounts, you should understand the pros and cons of both accounts.
Checking accounts are primarily used to pay bill and make purchases. You can also use your checking account to withdraw money from an ATM with your debit card. A checking account also allows an employer to directly deposit your paycheck to your account. This way you don’t have to make a trip to the bank to deposit your paycheck. Most checking accounts are insured by the Federal Deposit Insurance Corporation. This ensures that your money is safely stored at the bank.
Most checking accounts have a lot of fees. Some of these fees are monthly fees, maintenance fees, ATM withdrawal fees, overdraft fees, and debit card usage fees. Also, if you do not maintain a minimum balance in your checking account there will be a fee. There is also an ATM withdrawal limitation.
Savings accounts are best for people who want to save money and earn a bit of interest in the process. Savings accounts give you the ability to withdraw money at any time, which you cannot do in other long term investment accounts. You also do not have to invest a large sum of money in a savings account. Just like checking accounts, savings accounts are insured by the Federal Deposit Insurance Corporation.
Having quick and easy access to withdraw funds is a disadvantage because it can make it harder to save money. Also, savings accounts have the lowest interest earned in comparison to other types of investments (i.e. bonds and certificates). Lastly, if your account balance falls below a certain dollar amount you will have a fee.
There are pros and cons from both checking and savings accounts. Ultimately, you have to see what fits your needs.