- Checking and savings accounts function much like a temporary, short-term or long-term repository for the account holder's money. When a customer deposits money to one of these accounts, the bank adds the funds to its reserves and electronically credits the account. The customer may access a checking account by visiting the bank or an automated teller machine and withdrawing funds or by writing a payment instrument, known as a bank check or just check, to pay a third party. Savings accounts keep the money somewhat less accessible, but still allow a minimal number of withdrawals from either a bank or an ATM. Though the customer may withdraw the funds at any time, according to Idiot Proof Investing, banks typically loan out deposited funds and generate profits from the interest paid on those loans.
- Financial institutions offer a wide variety of checking and savings accounts, according to the banking website Master Your Card. Some banks offer free checking accounts that come with no monthly fee; these accounts typically have some requirements, though, like a minimum balance or regular electronic deposits. Standard accounts may have fewer requirements, but often carry a number of fees. Interest-bearing checking accounts pay interest on the average monthly balance, but may require a minimum balance or other stipulations. Other checking account types include student savings accounts with reduced fees and balance requirements, high-yield accounts that pay higher interest rates but carry higher fees and second-chance accounts that help account holders with a troubled past maintain a healthy financial portfolio. Savings accounts are typically more basic, including standard savings, high-yield savings and credit union savings accounts.
- Checking and savings accounts allow consumers a safe place to keep money, according to the Federal Deposit Insurance Corporation, or FDIC. If a bank holding a customer's accounts fails or cannot return the customer's money, the FDIC ensures the customer will not lose those funds -- up to a limit. In addition, checking accounts offer customers a way to send payments without sending actual cash, and debit cards linked to these accounts allow nearly instant electronic payments. Some organizations require employees to hold a checking or savings account, as those companies can save money by electronically depositing paychecks rather than sending a traditional paper check.
- Though checking and savings accounts hold a number of benefits, bank customers should exercise caution when using these accounts. According to the financial website Smart Money, banks may charge myriad fees on every type of checking account; charges for overdrawing the account, using automated teller machines, speaking with a service representative or even just maintaining the account. The money saving website Bargaineering also notes that customers with savings accounts may only initiate up to six withdrawals from those accounts, a requirement set forth by Federal Reserve Regulation D.