Starting a savings account is an essential step in managing your money. But how about other types of bank accounts, like a checking account? Do you need 1, and how does it differ from your savings account?
Keep reading to learn more about checking account features and uses.
Checking account vs. savings account
A checking account, also called a current account, is a type of bank account that is generally used for paying recurring bills and making large payments by issuing checks.
Meanwhile, savings accounts allow you to safely keep money for daily expenses or to set aside savings for future needs and goals. Here are other areas where the 2 might have similarities and differences:
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Interest rates
Savings accounts tend to offer higher interest rates than basic checking accounts, which often pay zero interest.
Some types of checking accounts are interest-bearing but may require a higher initial deposit and maintaining balance than basic accounts. Actual rates will depend on your chosen bank’s specific product offerings.
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Minimum initial deposit and maintaining balance
Checking accounts typically require a higher minimum initial deposit and average daily balance (ADB) than savings accounts.
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Fees and charges
Both types tend to come with fees associated with using and maintaining bank accounts, like withdrawal fees and charges for going below the required maintaining balance.
However, checking accounts may also have other fees, like a payment for a new checkbook or overdraft charges. The latter happens when a checking account doesn’t have enough funds to cover a check payment.
Some banks offer overdraft protection under certain conditions. This arrangement ensures your transactions can still push through even when your bank account has an insufficient amount.
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Other inclusions
You’ll get a checkbook when you open a checking account. Current accounts also tend to offer a debit card that you can use for online and in-store transactions, just like savings accounts.
Banks may also provide other inclusions like a passbook depending on the specific type of savings or checking account you’ll apply for.
Some savings accounts allow online application. On the Earnest app, you can apply for a Metrobank eSavings Account fully online without having to go to a branch.
What are checking accounts used for?
Paying bills and transferring money have become more convenient in the age of online banking. However, checking accounts can still be useful for many reasons. Here are a few:
1. For scheduled payments
A checking account allows you to issue post-dated checks (PDCs), which are typically required for paying rent and certain loans, like housing and car loans.
When issuing PDCs, make sure your account has enough money to cover the payments so your checks will clear and you’ll avoid overdraft fees.
2. For larger transactions
If you need to pay a large amount, like for a downpayment or tuition, check payments can be a safer and more convenient alternative to carrying cash.
The former is ideal for situations where checks are accepted, but bank transactions or digital transfers aren’t an option.
3. For keeping an organized budget
Maintaining separate savings and checking accounts can also help you manage money more efficiently. You can dedicate a checking account for certain recurring bills so it’s easier to track your spending and to set up payments.
Learn more about the specific features and types of Metrobank checking and savings accounts on the Metrobank website.
