Do you have multiple accounts that hold your money across different banks? If you’re like a lot of people, you keep one account for your savings, and yet another for checking. Some people have additional accounts for their retirement savings or after-tax investments—but that’s a whole different can of worms.
For those looking for a better way to manage their checking and savings, there’s another account that should be on your radar: a checking and savings account. It’s a hybrid between a checking and a high-yield savings account. You can write checks and they’ll even issue you a debit card. In this article, we’ll answer the question, “What is a checking and savings account,” along with a discussion of their benefits, how they’re used, and who might benefit from using this type of account.
What Is a Cash Management Vehicle?
A checking and savings account—also known as a cash management vehicle—is designed to manage cash, make payments, and earn interest. It’s a hybrid between a checking and savings account.
Cash management accounts typically come equipped with checking account features such as a debit card and ATM withdrawals. They also typically pay a higher rate of interest than keeping your money in a traditional savings account. If you have a checking account, you know how little they pay in interest; .08% is the national average .
Cash management accounts are often all-in-one accounts, and they can combine features of a checking account, brokerage account, and an interest-bearing savings account. (Not all checking and savings accounts include all these features, though.)
While checking and savings accounts used to be limited to those with high balances in brokerage accounts, this is no longer always the case. For example, online-only financial services companies are breaking the mold by offering similar accounts to those without a brokerage account or without having to meet a minimum balance requirement. They’re able to offer higher interest rates because they don’t maintain brick and mortar locations.
What to Look for in a Checking and Savings Account
While most checking and savings accounts share similarities, they won’t all be the same. Here are some items to consider when shopping around for a checking and savings account.
FDIC (Federal Deposit Insurance Corporation) insurance protects your money in the event your bank goes belly-up. For your safety and protection, it is essential that your checking and savings account is FDIC-insured. Some banks offer more coverage by using a system that spreads their deposits across several banks (this is done behind the scenes). For example, SoFi Checking and Savings offers $1.5 million in FDIC insurance per account.
Generally, you’re able to get a higher rate of interest within a checking and savings account than you are with a savings account at a brick and mortar bank. This interest rate will likely not be as high as in an online-only savings account, the trade-off being that an online-only savings account will usually limit your access to your money. SoFi Checking and Savings has aspects of a high-yield savings account and a checking account.
When deciding on an account, you’ll want to investigate its accessibility. Cash management accounts usually offer either a credit card or debit card hooked up to the account, allowing you to use it as if it were a checking account.
Most will also allow you to withdraw money at an ATM and set up bill pay. (For comparison, some high-yield savings accounts only allow you to access your money a certain number of times per month. Limiting the number of transactions in an account allows them to offer a higher interest rate.)
As with most types of bank accounts, there is a possibility for fees, such as monthly or annual account maintenance fees, or fees to use out-of-network ATMs. Conversely, some checking and savings accounts will actually reimburse you for any ATM fees you incur.
If you travel internationally, also be sure to check the account’s policy on international transactions and ATM usage. SoFi Checking and Savings, for instance, reimburses 100% of all ATM fees, even internationally, on qualified accounts.
Brick and mortar locations for checking and savings accounts are limited because in the past, most checking and savings accounts have been offered by brokerage banks. Brokerage banks do have physical locations, but they’re often limited to large cities.
If it’s important to you to be able to walk into a location, you’ll want to research whether there is on near you. Online-only banks specifically opt out of providing physical locations, often so they can offer more by way of interest rates. This will likely become more common as financial services move the majority of their operations online.
Who Should Use a Checking and Savings Account?
Because a cash management vehicle is a hybrid between checking and high-yield savings accounts, they would suit anyone who would like to consolidate the two. Most financially savvy folks understand that larger cash balances should be earning more interest than is offered in a “regular” checking account, but dislike coordinating checking and savings accounts at different banks.
Really, anyone looking to consolidate and elevate their finances should, at the very least, research a cash management vehicle to see whether it makes sense given their financial goals and the structure of their current accounts.
A checking and savings account is an excellent place to save up for short to mid-term goals, such as an emergency fund, a down payment for a home, for a wedding, or an exotic trip to celebrate paying off student loans.
As the landscape of financial services changes, it’s a good idea to stay up to date on advances in technology and improvements to the services provided to consumers. For a long time, brick and mortar banks had very little competition, as the physical locations (and convenience) were paramount to effective banking. As banking moves online, those with the most branches won’t necessarily be the ones providing the best customer service or the most competitive interest rates.
SoFi, who has been leading the charge in refinancing student loans to lower rates, is expanding its business to offer a checking and savings account that offers an interest rate competitive with high-yield savings accounts. They’re able to do so precisely because they don’t maintain physical branches—and understand the need for a more versatile checking and savings account that’s easy to use and and has no fees.
SoFi can’t guarantee future financial performance.
This information isn’t financial advice. Investment decisions should be based on specific financial needs, goals and risk appetite.
Neither SoFi nor its affiliates is a bank.
SoFi Checking and SavingsTM is offered through SoFi Securities, LLC, member FINRA/SIPC.
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