When managing your finances to afford life’s necessities and wants, you’ll need a bank account. Consider two common options: the checking account and savings account.
Read more: Learn how Ally Bank’s buckets and boosters can organize and optimize your accounts.
What is a checking account?
A checking account is a type of deposit account that’s held at a traditional bank, online bank or other financial institution that allows regular deposits and withdrawals. It provides easy access to your money via debit cards, checks and ATMs. A checking account is usually a go-to account for daily expenses, such as groceries, internet and rent.
Benefits of a checking account
With a checking account, you can easily set up direct deposits and receive wire transfers from any domestic bank. The Ally Bank Spending Account, a checking account designed for modern money management, includes early direct deposits on eligible direct deposits, as well as overdraft protection, among other features. Ally bank and some other checking accounts also pay interest on the account balance.
A checking account is usually a go-to account for daily expenses, such as groceries, internet and rent.
What is a savings account?
A savings account is an interest-bearing deposit account that’s also available via a traditional bank, online bank or another financial institution. With a savings account, you can also set up direct deposits and receive wire transfers from any domestic bank.You have less access to your money with a savings account. Most don’t have checks or a debit card, and you may be limited to a specific number of monthly withdrawals or transfers. (Exceeding the limit may result in a fee.)
Benefits of a savings account
Savings accounts usually accelerate your savings (including your emergency fund) because they tend to pay higher interest rates than checking accounts. Ally Bank's Savings Account also comes with savings-boosting tools.
Key difference between checking and savings accounts
Compare the checking and savings accounts at Ally Bank.
Ally Bank Spending Account | Ally Bank Savings Account | |
|---|---|---|
Purpose | Access money for daily use | Set aside money for longer-term goals |
Withdrawal limits | None | Limit of 10 withdrawals per statement cycle |
Interest | Pays interest at a competitive rate | Pays interest at a competitive rate |
Features | Early direct deposit, spending buckets, FDIC-insured, among others | Savings buckets and boosters, personalized recommendations, competitive rate, FDIC-insured, among others |
Fees | No fees for maintenance, overdraft items, low daily balance, standard check and debit cards, deposit slips and prepaid envelopes, and standard or expedited transfers. Fees for expedited delivery of checks and debit cards, outgoing domestic wires, stop payment, overnight bill pay, same-day bill pay and international transactions. | No fees associated with maintenance, overdraft items, standard or expedited ACH transfers, incoming domestic and international wires, official/cashier’s checks or excessive transactions. Fees for expedited delivery and outgoing domestic wires. |
Look for accounts with secure mobile banking features like remote check deposit and the ability to transfer funds using a mobile payment service. Try to not get overwhelmed by the various offerings and focus your attention on the following benefits:
Competitive annual percentage yield, or APY
No minimum balance requirement
No monthly maintenance fees (or easy ways to avoid them)
Should you have both a checking and savings account?
Yes. Having both types of accounts can help you achieve your financial goals, earn interest and organize your money.
Is my money safe in checking and savings accounts?
Your money is FDIC-insured up to $250,000 per depositor and per qualifying account ownership category.
Should one account be used over the other?
Choosing how much money you should allocate to your checking or savings account depends on your financial needs. If you’re looking to save for several things, like an engagement ring or new exercise bike, depositing more of your paycheck into your savings account may make the most sense. Once you’re ready to make a purchase or need the funds, transfer it to a checking account.But for your regular, everyday expenses, a checking account is likely the best option.
Alternatives to regular savings accounts
You may want to consider other savings options like a money market account or a certificate of deposit, also known as a CD.
Higher-yield money market account: Money market accounts can earn a variable interest rate, possibly more than you'd receive from regular savings accounts.
Certificates of deposit: A traditional bank CD is an interest-bearing deposit account in which you agree to keep your deposit in the CD for a set term, usually in exchange for a more competitive interest rate.
The bottom line
It’s beneficial to have both a checking account and a savings account. An Ally Bank Spending Account will help you manage and pay for everyday expenses, while an Ally Bank Savings Account can help you save for your future.
