Lesson 1 of 3 · 1 minute read
Checking and savings accounts
What each kind of account is for, and what to ask before you open one.
Most people use two kinds of accounts.
Checking: for everyday money
A Checking accountA bank or credit union account for everyday money. You use it to get paid, pay bills, and buy things with a debit card.More in the glossary is where your paycheck lands and where your bills get paid from. You can use a Debit cardA card that takes money straight out of your checking account when you pay. It's not a loan like a credit card.More in the glossary to buy things, take cash out of an ATM, and pay bills online.
Savings: for money you want to keep
A Savings accountA bank or credit union account for money you want to keep, not spend. It usually pays a little interest.More in the glossary is for money you don’t plan to spend right away, like an Emergency fundMoney set aside only for surprises, like a car repair or a medical bill, so you don't have to borrow.More in the glossary. It usually pays a little InterestThe price of borrowing money. You pay interest when you borrow, and you can earn interest when you save.More in the glossary. Keeping savings in a separate account makes it harder to spend by accident.
Banks and credit unions
Both can hold your money safely. A Credit unionA not-for-profit alternative to a bank that is owned by its members. It often has lower fees and lower loan rates than big banks.More in the glossary is owned by its members and often has lower fees. Either way, make sure your money is protected by Deposit insuranceGovernment protection for money in a bank (FDIC) or credit union (NCUA). If an insured bank or credit union fails, you get your money back, up to a limit.More in the glossary. Look for the FDIC or NCUA sign.
Questions to ask before you open an account
- Is there a monthly fee? How can I avoid it?
- Do I need to keep a minimum balance?
- How much do you charge for an overdraft? Can I turn overdraft coverage off?
- Are there fees for using ATMs?
Most people use two kinds of accounts. Checking is for everyday money. Savings is for money you want to keep.
Your paycheck goes into your Checking accountA bank or credit union account for everyday money. You use it to get paid, pay bills, and buy things with a debit card.More in the glossary. You pay bills from it and use a debit card to buy things.
A Savings accountA bank or credit union account for money you want to keep, not spend. It usually pays a little interest.More in the glossary holds money you don't plan to spend soon. It usually pays a little interest.
Banks and Credit unionA not-for-profit alternative to a bank that is owned by its members. It often has lower fees and lower loan rates than big banks.More in the glossary both keep money safe. Look for the FDIC or NCUA sign.
Before you open an account, ask about monthly fees, minimum balances, and overdraft fees. Ask if you can turn overdraft coverage off.