The difference between checking & savings accounts are quite a few minor details. Starting with the obvious, the names, checking and savings have different meanings and different intents. Checking accounts are demand deposit accounts. They’re intended to manage transactions. Savings can be called time deposit, or term deposit.
Depending on the bank, transactional records of finance vary. People can use personal checks instead of cash to pay bills. They also have bank cards and can be used to withdraw money from the bank or ATM machines. There are many internet checking accounts available with immediate access to your funds.
Checking, or transactional accounts usually allow for unlimited withdrawals, whether by check or atm. If you have extra money, or you are trying to save for a rainy day, you may want to protect these funds from theft or loss. They deposit it into the bank to keep it safe, or in time deposits to save the money and have it grow with interest given from the bank. Children’s savings accounts are a great place to start. Kids don’t have a lot of monthly expenses, and they can watch their accounts grow.
Transactional allow customers to deposit, withdraw, and transfer their money whenever they want to do so. You can order checks that have your bank information and your account information pre-printed on them. To withdraw money some of this money or transfer it to someone else, the person fills out a check and gives it to the person to whom the money is supposed to go.
The payee can cash the check to get the money or deposit the check in a bank. The funds are deducted from your account and deposited into the payee’s account, or if he goes directly to your bank, handed to him in the form of cash. A check is just an order to your bank to pay a certain amount of money to the payee specified. It’s not actually money itself.
Banks and credit unions prepare monthly statements for checking account customers. The statement shows how much money has come into and gone out of the account during the month. Customers who keep their own records can compare their figures with those of the bank. These statements require a tremendous amount of book keeping.
If you’re willing to give up some of your liquidity and keep money in the bank for a period of time in a savings account, the reward is that the bank will pay interest on your money. The amount of interest paid depends on the type of account. Some accounts earn three percent interest a year. Others may earn five percent or more. The interest rates are regulated by the Federal Reserve Board.
Someone who deposits money in a term deposit usually receives a passbook that shows the amount of money in the account. You could only withdraw funds by going to the bank with the actual physical passbook, proving that you were the owner of the account and there were funds available.
Now that everything is electronic, even savings accounts can be accessed using a plastic bank card at the ATM. But unlike checking accounts, frequent withdrawals will cost you in bank fees. If more than one person owns the account, either one can have access to the funds via a bank card.
Because savings accounts have far fewer transactions to track, they have historically been less expensive for banks in terms of manhours. That’s why they can offer to pay interest on the funds. They used to have a standard requirement of thirty days notice to withdraw funds. But in practice, money in a time deposit can be withdrawn on demand.
Both types of record finances are good, it all depends on whether it is wanted for keeping money and having it grow throughout the year, or having quick access to the money when it is needed.
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