First things first. What are these accounts?
Wondering what is a savings account and what is a deposit account? You’ve come to the right place. Savings accounts and deposit accounts are two of the most common types of bank accounts and nearly 95% of adults use these accounts to manage their money.
What is a savings account? A savings account is defined as a place to store your money securely while also earning interest. As the name entails, most people use this account to save up for a large purchase at a later date. This could be a vacation, emergency fund, or another type of goal. Savings accounts are FDIC-insured, meaning the federal government protects the money in your account for up to $250,000.
What is a deposit account? A deposit account allows withdrawals and deposits. Deposit accounts are where most people have their income deposited and where they pay their bills from. Like savings accounts, deposit accounts are also FDIC-insured.
Ok, I’m new to this. What is the difference between a deposit and savings account?
Both accounts are offered by banks and are a common, secure place for people to store their money. So what is the difference between a deposit and savings account?
Savings accounts are for storing money aimed at an end goal or for at a later date. They are not for managing your money on a day-to-day basis. Because of this, savings accounts come with restrictions on how much money you can withdraw at any given time. In return, you are compensated with a higher interest rate.
On the other hand, deposit accounts are for daily deposits and withdrawals. You can use your deposit accounts to pay bills, make purchases, withdraw cash, and accept payments. Most deposit accounts don’t earn interest on their balance.
When deciding between a deposit account vs. savings account, know that you can have both! Generally, banks tend to offer joining deposit and savings accounts to have all of your money in one place.
Both savings accounts and deposit accounts have routing and account numbers, and if both accounts are linked you can see both relevant balances when logging into your account online.
When researching deposit and savings accounts, keep in mind that they come with different fees. The annual percentage yield (APY) you’re able to earn on deposits, withdrawal regulations, and other features like banking access may be different as well.
Keep an eye out for monthly fees, ways to waive those costs, and seek out high-APY options that help you earn more money over time.
Deposit account vs. saving account: A breakdown
You’ll want to have a sound understanding of the differences between a deposit account vs. savings account before heading to the bank.
Savings accounts are a safe and reliable option to store cash for short term goals. The major benefits of a savings account include earning interest while you store your money. Other benefits of a savings account include being FDIC-insured, no required minimums, and guaranteed returns.
The downside? You might have a monthly limit on what you can withdraw without paying extra fees.
The key benefits of a deposit account include high liquidity rates for everyday transactions such as “treat yourself” impulse buys, ATM withdrawals, and bill paying. Other benefits of a deposit account include being FDIC-insured, compatibility with debit cards, and being able to set up direct deposits. The downside? They typically earn little to no interest.
Still curious about how a deposit account vs. savings account compares? Read on to discover the key benefits of deposit and savings accounts, and find out which one is best for you.
Deposit account vs. savings account
|Deposit Account||Savings Account|
|Goal||Spending: A deposit account is typically used to cover daily expenses and make daily payments.||Saving: The primary goal of a savings account is to save your money.|
|Withdrawal Rules||ATMwithdrawal limit: Most deposit accounts limit the amount of ATM withdrawals you can make.||Withdrawal limits in place: Most savings accounts limit you to six withdrawals per month. The exception? In-person and ATM transactions.|
|Interest Rates||Low interest rates: In exchange for liquidity, deposit accounts usually don’t offer high interest rates (if they offer interest to begin with). The average interest rate for a deposit account is 0.04%.||Higher interest rates: The national savings rate was 0.05% as of January 27, 2020. Pro tip: seek out a savings account with a higher APY (annual percentage yield) to get the best interest rate.|
|Fees||Higher fees: Since deposit accounts are transactional, many have monthly fees that can be waived if you meet certain requirements (such as minimum balances).||Lower fees: Banks may charge fewer fees on savings accounts (or no fees at all).|
|Liquidity||High liquidity: Deposit accounts are extremely liquid and therefore allow for numerous deposits and withdrawals.||Low liquidity: Savings accounts generally limit the amount of deposits and withdrawals on a monthly basis.|
|Time||Short term: High liquidity and low interest render deposit accounts ideal for meeting short term financial goals.||Long-term: Low liquidity and higher interest rates make savings accounts ideal to grow your money in the long run.|
What should I know before I start banking?
Are you new to this whole banking thing? Keep a few of these tips in mind before you open your account.
- Pay attention to the 50/30/20 rule: Experts suggest that 20% of your income should go towards savings, while 50% should go to daily necessities, and 30% should go to discretionary items. Stick to this rule, and your financial future will look bright.
- Automate your savings for the win: The best way to save money is to move money over to savings automatically each month. Automatic transfers are the key to amping up your savings—minus the stress.
- Embrace rewards on repeat: Many banking accounts offer some sort of rewards. The secret is finding one with the best rewards for you. RoarMoneySM offers debit card rewards for daily spending. With MoneyLion, every day can be a “treat yourself” day.
- Track your spending: Go for a bank that has smart tools to help you monitor your total financial health all in one place. Hey there, RoarMoney.
- Start a save big challenge: Who’s a better competitor than yourself? Bet on how much money you can save on a monthly basis, even if you’re starting small. Chances are your savings will grow faster than you can say “Thanks, MoneyLion!”
- Stay instantly in the know: A mobile banking app like MoneyLion not only lets you see all of your spending in the palm of your hand but also gives real time alerts so that you can stay on top of your finances all day, every day.
If you’re still stuck between a deposit account vs. savings account, make sure to check out RoarMoney! RoarMoney is an excellent banking option that makes your money work and bumps up payday up to two days early1 with direct deposit. You’ll access top notch money management tools, withdraw cash at 55,000 no-fee ATMs2enjoy rewards, and more. Read more about RoarMoney .
Ready to get started? Download the free MoneyLion app and go to the Finances tab to sign up in minutes. If you’re already a MoneyLion member you can open a RoarMoney account in the app and transfer your balance over in seconds. Your financial future just got brighter. Join the pack today!