Checking vs savings accounts: what you should know
Banks offer different types of bank accounts. Find out the main differences between checking vs. savings accounts and how they work together.
Updated 
8 min. read
A checking account is used for everyday transactions like bill payments, depositing money, and writing checks.- A savings account is better suited for long‑term growth by helping you set aside funds for a financial goal or to build an emergency fund.
- Using both accounts together makes it easier to stay on top of daily finances while preparing for what’s ahead.
Choosing the right kind of bank account for your needs can feel overwhelming at first. Checking and savings accounts each play a different role in managing your finances, but how do they compare? Read on to better understand the differences between the two and which account(s) would best meet your needs.
How are checking and savings accounts different?
The main difference between a checking and savings account is how they’re used. Checking accounts are designed for everyday transactions while savings accounts are best used for saving and growing your money. Depending on your financial goals, having both may make sense, but whatever you choose, both BMO checking and savings accounts are insured by the FDIC.
What is a checking account?
Designed to support regular transactions, a checking account helps you meet your everyday banking needs, including:
- Depositing money, such as cash or your paycheck
- Paying bills
- Withdrawing cash from an ATM with your debit card, which typically comes with your checking account
- Paying for purchases with a debit card
- Writing a check for rent, a contractor, etc. Checks are typically also included in your checking account
BMO offers various types of personal checking accounts to help you manage your finances.
Pros and cons of a checking account
Pros:
- Ideal for daily transactions, such as paying bills or buying groceries
- Allows for more transactions per month, compared to a savings account
- Can set up direct deposit to conveniently deposit your paycheck
- Typically gives you access to a debit card, allowing for purchases in-store and online
Cons:
- Most checking accounts don’t earn any interest on the account balance
- Prone to debit card fraud which could disrupt bill payments
- Some accounts may charge fees
Types of checking accounts
Every bank provides a selection of checking accounts to choose from, each with their own benefits. BMO offers a variety of personal checking accounts including:
→ BMO Smart Advantage Checking
One of the most popular checking accounts, BMO Smart Advantage Checking, has no monthly maintenance fees or minimum balance requirements.1 A great option for consumers who want to avoid monthly maintenance fees.
This account offers clients $0 for overdraft fees2 and has a low $5 monthly maintenance fee3. If you’ve paid more than your share in overdraft fees, BMO Smart Money Checking is a great choice.
Want to earn interest on your checking account? Then this account may be for you. You can also get added perks, like unlimited Non-BMO ATM Transactions and up to $25 in Non-BMO ATM surcharge fee rebates per statement period. Plus, you can avoid paying the $25 monthly maintenance fee if certain conditions are met. BMO Relationship Checking is a great option for those who want to get more rewards as your relationship grows with us, and earnings on their deposits.
What is a savings account?
A savings account is the ideal place for your money to sit and grow, through earned interest. It’s where you can set yourself up for the future, build an emergency fund, or build towards your long-term financial goals (such as a vacation or a down payment on a home or car).
While a checking account is better for daily transactions (e.g. your electric bill), a savings account acts as a reserve for funds for future use, though you can still access your funds if you need to. Through your savings account, you can:
- Set aside a portion of your paycheck for savings.
- Allocate funds for that dream trip.
- Ensure a buffer of cash for the unexpected and major life events.
- Transfer funds from your checking account and vice-versa.
- Save regularly with recurring transfers from your checking account.
As the name suggests, savings accounts are intended for saving your money and are geared for more medium and long-term planning. Because of this, they typically come with a limited number of free transactions per month, after which you’ll face additional fees.
Alternatives to savings accounts
Leveraging the benefits of a savings account can help you manage your money today, while saving for tomorrow. However, they’re not the only options offered by banks. Other saving products to consider include:
→ Certificates of Deposits (CDs)
Want to earn more in the short-term on your savings? A Certificate of Deposit (CD) can help you lock in a great interest rate and grow your money. This type of account differs from traditional savings accounts in that it can offer higher interest rates depending on the term you select, and you can only access your funds once the account matures. BMO offers CDs starting at $1,000 minimum balance with terms as short as three months or as long as five years. If you don’t need to touch your money for a few years, you can get higher rates and earn more, making it a great savings vehicle for users who want to maximize their money.
A money market account also generally offers higher interest rates than a traditional savings account while providing a great savings tool. Unlike a CD, however, your money is not locked in; it’s accessible whenever you need it, subject to transaction limitations. And it often comes with a debit card or the ability to write checks. For as little as $25, you can open BMO’s Growth Money Market account.
BMO offers a selection of savings accounts with diverse features to suit your interests.
Looking to open a savings account?
Learn how BMO’s Savings Builder account can help you grow your savings faster.
How much should I keep in a savings account?
No matter how much we prepare for the future, life has a way of surprising us. And there’s no better antidote to an unforeseen event such as an illness or layoff, than a financial safety net. One of the biggest advantages of a savings account is that it’s an ideal tool to build your emergency fund.
While there’s no single right answer for how much you should keep in your savings account, a common rule of thumb is to aim for three to nine months’ worth of essential expenses, such as housing, food, and transportation.
To help you stay on top of your savings, try to follow the 50/30/20 rule.
Under this approach, 50% of your income goes toward essential needs like housing, food, and childcare. 30% of your income can be spent on things you want like travel and entertainment. Finally, 20% of your income should go towards meeting your financial goals, whether that’s savings for a special purchase or building an emergency fund.
Pros and cons of savings accounts
Pros:
- Helps you meet your mid- to long-term financial goals
- Ideal tool to grow an emergency fund
- Offers easy access to your money
- Provides financial stability and certainty
- Earns interest on your account balance
- Allows clients to set up recurring transfers to save automatically and grow their balance
Cons:
- Some banks offer a limited number of free withdrawals per month
- Interest rates offered by standard savings accounts are often lower than alternatives like stocks or money market accounts
- Doesn’t allow for writing checks or debit card purchases
Checking vs savings accounts at a glance
| Account Features | Checking Accounts | Savings Accounts |
|---|---|---|
| Transactions | May be limited or unlimited | Typically limited per month |
| Withdrawals | Usually unlimited, with no restrictions | May have restrictions |
| Monthly Fees | Monthly fees may appl to some accounts | Monthly fees may apply to some accounts |
| Interest | Most accounts offer little to no interest | Earns interest, with varying rates based on account type and institution |
| Access | Usually coms with a debit card, or you can access funds in person or online | Does not usually come with a debit card but you can access funds in person or online |
| Best for | Everyday purchases | Short or long-term financial goals |
Why you need both a checking and savings account
Both checking and savings accounts serve important purposes, which is why you may decide to open both a checking and savings account to help manage your money. Think of your checking account as your daily account, helping you with your everyday needs. Your savings account can be viewed as your long-term planning account. Use it to plan for a rainy day through growing your emergency fund, prepare for future purchases and achieve your financial goals.
Before opening any account though, do your homework. Check the account fees, minimum balance requirements, interest rate(s) (which can change over time), overdraft fees, mobile app functionality, and customer service. Your money reflects your hard work, so you want a bank that makes the process of managing your finances seamless.
Checking vs savings account FAQs
Both checking accounts and savings accounts held by consumers are insured by the Federal Deposit Insurance Corporation (FDIC). See the FDIC’s website at www.fdic.gov for current deposit insurance limits.
If possible, having both a checking and a savings account could be beneficial, so that you can enjoy the benefits of both products.
Leveraging the benefits of both accounts can help you manage your everyday finances while saving funds to meet your financial goals. If you decide to open a checking and savings account in the same bank, transferring money between the two is a lot easier. You can even set up recurring transfers between accounts to make ensure you save regularly. Opening both a checking and savings account can also allow you to take advantage of overdraft protection; funds in your savings account may be able to cover overdrafts in your checking account.
Ready to open a bank account?
Related articles
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What is a Savings Account? Pros, Cons, and Key Features
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Accounts are subject to approval and are provided in the United States by BMO Bank N.A. Member FDIC.Zelle® and the Zelle® related marks are wholly owned by Early Warning Services, LLC and are used herein under license.
Footnote 1 details If your balance is zero, we may close your account.
Footnote 2 details Items that overdraw the account are returned and ATM/everyday debit card transactions are declined.
Footnote 3 details Monthly maintenance fee is waived if the primary account owner is under age 25.
Accounts are subject to approval and are provided in the United States by BMO Bank N.A. Member FDIC