When managing your finances efficiently, you can choose between two primary types of accounts: savings and checking accounts. These serve different financial purposes, one is for personal and the other is for business finance.
Having a savings account means saving money and growing money in a secure way, ideal for achieving personal financial goals. Conversely, having a checking account ensures easy access to everyday transactions, perfect for business owners who need to perform frequent deposits and withdrawals.
Read this blog to explore the key differences between savings account vs checking account, helping you decide which one to open for your financial needs.
What is Checking Account
Checking accounts are one type of bank account that helps account holders make withdrawals or deposits. In India, checking accounts mostly are considered as current accounts. With these accounts, there is no withdrawal and transaction limit, so these are suitable for businessmen, firms, organisations, traders and entrepreneurs.
What is Savings Account
Before diving into the debate checking account vs savings account, it is important to understand what a savings account is. Savings accounts are one of the most popular financial products in India. People use this account to keep their money safe and grow it at a nominal interest rate to fulfil various goals, including building an emergency fund or saving for a vacation.
What is the Difference Between a Checking and Savings Account?
Here is a table to show the difference between checking and savings account in a simplified manner:
| Parameters | Checking Account | Savings Account |
|---|---|---|
| Purpose | You can open a checking account to make everyday transactions seamless for your business, such as bill payments, online purchases, etc. | You open a savings account to safely park your savings and to meet various financial goals. You do not need to use the fund immediately. |
| Account Fees | This type of account comes with multiple fees, including overdraft fees, overdraft protection fees, ATM fees, and online access fees. | This type of account typically comes with nominal fees. However, banks charge fees, if you fail to keep the minimum balance or exceed withdrawal limits. |
| Interest Rate | Your funds do not earn any interest when you keep them in a checking or current account. | In this case, your funds earn interest on the balance maintained. The rate of interest ranges from one bank to another. |
| Minimum Balance Requirements | You need to maintain a higher balance in your checking account than in a savings account. | You can even open a zero-balance savings account. |
| Accessibility | These accounts have no limitations on deposits and withdrawals as they are meant for everyday transactions. You can make multiple withdrawals and deposits per day without any constraints. | These accounts have limitations. You can only get three to five free transactions per month. After that, you need to pay a service charge for doing transactions. |
| Overdraft Facility | You can withdraw more funds than you have in your checking account. | You can not do so being a savings account holder. |
Key Advantages of Having a Checking Account and Saving Account
Here are the benefits of checking and saving account:
Benefits of Checking Accounts
- Convenience: You can easily deposit and withdraw money, pay bills, and make purchases.
- No Limit for Transactions: There are no limitations on withdrawals or deposits with checking accounts, suitable for entrepreneurs, traders, and companies.
- Easy Payment Processing: You can process payments easily with a checking account, by cheque, online transfer, or debit card.
- Overdraft Limit: You can withdraw more funds than the available balance with a checking account.
Benefits of Savings Accounts
- Safe and Security: As per Deposit Insurance and Credit Guarantee Corporation (DICGC), a security arm of the Reserve Bank of India, your funds remain safe for up to ₹5 lakhs, even if a bank fails.
- Interest Rates and Returns: You can gain interest on the balance maintained in your savings account.
- Convenient Money Transfer: You can easily transfer funds from your account during emergencies or paying bills.
- Digital Services: These days, most banks offer net banking and mobile banking services with a savings account.
Checkings vs Savings: Which is the Right Option for You?
Deciding between a checking and a savings account entirely depends on your financial needs and goals. Checking or current accounts are more suitable for businessmen, entrepreneurs and organisations as they need to do a lot of transactions. Besides, they come with an overdraft facility, a boon for entrepreneurs.
On the other hand, savings accounts are ideal for growing wealth over time as they offer an interest rate on the balance maintained. Besides, they help you meet your future financial goals, such as saving for a foreign trip, buying appliances and more, protecting you from unexpected expenses and meeting your long-term savings goals.
The Final Thought
Savings account vs checking – knowing the difference helps you confidently choose the account that aligns with your financial needs. However, there is no rule that you cannot open both accounts. You can have a savings account and a checking account to effectively manage your finances. Hence, you need to assess your financial requirements before opening these accounts for your banking needs.
To open a savings account, you can opt for Torus Digital! We offer 7.75% interest on savings accounts. We have a zero-balance savings account for our customers. Download the app today!
