Rihanna, an online tutor at TAE, recounts her college life experience and states that her biggest milestone in college was opening a checking account. Well, it is true for most of us. When we open our first savings or checking account, we are all thrilled. These are the two financial tools, which will help you make your college life and post-college life much better.
Now, let’s understand a little about both of these accounts, and then we’ll discuss the advantages and disadvantages of both checking account and savings account.
A checking account helps you pay your bills, whereas a savings account helps you stack your money and keep you better prepared to deal with the contingencies of the future. Now, though there are abundant advantages of savings account and checking accounts, there is also an equal share of negatives of both of these accounts.
So, before you opt for either or both of them, you should have a thorough knowledge of the pros and cons that you might experience as a result of opening these accounts.
Advantages of Checking Account
With a checking account, you get unlimited access to both mobile banking, as well as, online internet banking. Also, you get a debit card, and you can use it to withdraw money from the ATM or make purchases. You can also directly withdraw money from your checking out if you do not have a debit card or use checks for making purchases or payments. Tahira, an accounts manager at EduWorldUSA, says that she finds it relatively easier to deposit the paycheck of the workers in their checking account.
Moreover, via the direct deposit facility, the employer can automatically transfer their payroll amount in the banking account of the employees. This helps save a lot of time, and there’s no need to visit the bank for encashing the paychecks.
Besides, the good thing about the checking account is that these accounts are insured by FDIC, which is the Federal Deposit Insurance Corporation.
So, on your checking account, you can enjoy a guarantee of approximately $250,000. This directly implies that the money of the account holder is stored safely in the bank.
Disadvantages of Checking Account
As good as it seems and appears, the checking account certainly has its share of disadvantages. Lauren, who is a tutor at TFTH shares her experience, saying that she hates the fact that there are a bunch of fees levied on the checking accounts. Some of the fees that the checking account holder has to bear every month include the ATM withdrawal fee, maintenance fee, over-the-phone transaction fees, and the in-bank transaction fees.
That’s not all. There are a few banks that will also want you to maintain a minimum balance. If you fail to do that, you’ll be charged a fee whenever your balance is lower than what’s required.
In addition to this, there are limitations to your ATM withdrawals. There is also a fee applicable to your debit card usage, and potential Overdraft fees are levied too.
Advantages of Savings accounts
Savings account is a perfect solution for when you wish to stack all the extra money in an account while simultaneously earning money on this amount in the form of interest. One of the prime advantages of the savings account is that it lets you withdraw your money whenever you like, unlike the Certificate of Deposits or the long-term investments.
Furthermore, to open a savings account, you will need a very little investment amount. However, it most certainly depends on the type of account that you open. Similar to the checking account, even your savings account is insured by the Federal Deposit Insurance Corporation.
So, even if the banks fail at any time, your money stays safe. Anaida, who is a popular online course-help educator, with TrumpLearning, says that one feature she loves about a savings account is its auto-deduction feature, wherein she can pay the bills automatically without worrying about superseding the due date. Moreover, the monthly fee applicable to a savings account is also very little.
Disadvantages of Savings accounts
Since it is easy for the account holders to withdraw money from the savings account, it gets hard for them to have any real savings. Not having savings could be a problematic situation and could be dangerous in the case of contingencies.
Furthermore, the interest that the savings account fetches you on the savings is low. It is lower than almost all the other types of investment.
Moreover, a lot of savings accounts do have a requirement of maintaining a minimum balance. At any time, if the account holder is unable to maintain this balance, he will have to bear some changes. These charges are, at times, so high that they even negate the interest so earned.
Another disadvantage of savings accounts that you should know is that as part of insurance by FDIC, you are covered for an amount only up to $250,000. This could be a cause of worry for the individuals who have an amount more than that parked in their savings account.