Checking and Saving FAQs

Posted July 11 2014
by PenFed Team
image of check and pen

Whether you’re looking to open your first checking account or you’re considering adding a new savings account to your financial plan, chances are you have some questions. Just how does your checking account work? Which account should you choose? And do you really need a savings account at all? To help you pick the right account for your needs, we’ve rounded up answers to common checking and savings questions.

Why do I need a separate checking and savings account?

Though a checking account is a convenient place to keep your spending money, it doesn’t do anything to help you save — and even if you have an interest-bearing checking account, it likely pays less in interest than a standard savings account. If you have more money in checking than you need to cover your regular expenses, you could get more out of that money by putting it in an interest bearing account where it would grow over time.

And if you’re the sort who looks at your bank balance as the amount you have to spend, putting money away in savings can help you save up for a rainy day by separating it from your everyday spending money.

Do I need to keep a minimum account balance?

Depending on the account types, both checking and savings accounts can require a minimum balance — and if you don’t meet that minimum balance, you’ll likely be required to pay some kind of fee. If you’re worried about minimum balances, be sure to review your account options before you open a checking or savings account. Accounts advertised as “free” or “basic” may have no or a low minimum balance requirement.

What types of checking and savings accounts are there?

There’s an account type to suit the needs of any consumer, but the number of account types can be a confusing, too. At the very basic level, there are checking accounts — basic accounts that offer few restrictions on balances or how and when you can withdraw money — and savings accounts — which generate interest, but may have a minimum balance requirement and restrictions on the number of transactions you can make a month.

However, you’ll find even more account types advertised. If you’re shopping for an account, these are the types you’re most likely to see:

  • Basic: A basic account is just that, a no-frills account that offers few extras — and few costs. Typically, a basic account is good for most people, though if you have special financial needs you may find another account type suits you better.
  • Free: Most financial institutions offer accounts branded as “free,” which means it doesn’t have a monthly service charge or (usually) a balance requirement. Like a basic account, these provide no fancy amenities but offer the basic services you’ll want out of an account. However, before you sign up for free checking, be sure to pay attention to any fees or costs you may incur by using it — sometimes fees can add up and make your “free” account not so free.
  • Joint: An account shared by two or more people, this is an ideal setup for spouses because it allows both individuals access to the account to pay household expenses. Most types of account can be set up as a joint account.
  • Senior or Student: Though the details vary greatly depending on your financial institution, there are typically special account deals on offer for both students and seniors. Since these often involve reduced fees or other discounts, they’re worth looking into if you qualify for them.
  • Interest Bearing: Traditionally, checking accounts don’t gain interest while savings accounts do — however, you can also get interest-bearing checking accounts. Expect interest-bearing checking to require a higher minimum balance and perhaps have other fees — but don’t expect to get as good of an interest rate as you would on a savings account.
  • Money Market: Another kind of interest-bearing checking account, money market accounts combine the advantages of checking and savings into a single account, paying interest and offering lots of other frills. Though this can be a good account type with a selection of fee-free extras, you’ll have to maintain a high balance to get one. Your financial institution may also have limits on the number of transactions you can make a month.
  • Express: If you prefer to bank by ATM or on your computer, an express account is probably what you want. You’ll typically have fees for transactions done with a bank teller, but if you don’t often visit tellers in the first place, you’ll likely find these accounts ideal, with low balance requirements and few fees.
  • Lifeline: The ultimate no-frills account, these are designed for individuals with low income. There’s usually a set fee per month as well as a limit on the number of transactions a month, but a low minimum balance requirement (if they have one at all) make these account easy for low-income households to open.

I have bad credit — can I get a checking or savings account?

It really depends on what you mean by bad credit. Your financial institution typically won’t care about debts or the like when you’re applying to open a checking or savings account, but there are some marks on your credit that will make them steer clear.

If you’ve had accounts that have been closed due to negative balances or because you lied when you opened the account, banks will report that to ChexSystems, where the information will stay for 5 years. Some financial institutions won’t let you open an account while you’re on the ChexSystems list, others will only offer accounts with higher fees, and others will require you to prove you’ve paid off your balance.

What kind of fees can I expect on my accounts?

Though this will vary, you might run into these fees on your monthly statement:

  • Account Maintenance Fee: Charged monthly for the maintenance of your account. For some accounts, you may be able to avoid a maintenance fee by meeting a minim balance.
  • ATM Fee: Though most financial institutions offer free transactions from their own ATMs, you can expect most of them to charge fees at other ATMs. Some offer a network of ATMs you can use for free; so be sure you know where you can do business without fees before you use an ATM!
  • Transaction Fee: Some accounts, specifically savings, will limit the number or type of transactions you can make in a month — if you go over that limit, expect a fee.
  • Overdraft Fee: Many banks offer overdraft protection, which allows purchases to be made even if you don’t have enough money in your account to make them. However, if you overdraw your account in this way, you’ll not only have to pay for the transactions but also pay a hefty overdraft fee for each transaction.

When will money I’ve deposited be available?

This can vary depending on when and how you’ve deposited it, but usually any money you’ve put in your account will be available by the next business day at the latest. If you deposit money early in the day, it will often be available in your account that same day.

Is my account safe?

Whether you’ve put your money in a bank or a credit union, your checking and savings accounts are insured by the federal government for up to $250,000 — no matter what happens, your money is safe.

Do I need to balance my checkbook?

Even though most of us do a lot of banking online, it’s still important to review your monthly statement and balance your checkbook so you know just how much money you have on hand and can spot fraudulent transactions if they’re made.