Whether you need a savings account depends on your situation, not on what anyone tells you is normal
A savings account is useful if you want to set money aside and have it sit in a bank where it earns a small amount of interest. You do not need one to receive a tax refund, government payment, insurance payout, or business refund. You do not need one to have a job. You do not need one to cash a check. What you need depends on what you are trying to do with the money once it arrives.
If you are waiting for money to come back to you—a tax refund, stimulus payment, insurance settlement, or business reimbursement—the real question is how you want that money delivered. A savings account is one option, but it is not the only one, and it may not be the best fit for your circumstances.
Key Takeaways
- You can receive refunds and government payments without a savings account by using direct deposit to a checking account, a prepaid card, paper check, or a money order.
- A savings account is only necessary if you want to hold money in a bank and earn interest on it over time.
- Direct deposit—whether to checking or savings—is the fastest way to receive most refunds and payments, usually arriving within one to three business days.
- Paper checks and prepaid cards work without any bank account, though they take longer and may have fees.
- If you do not have any bank account, a prepaid card or check-cashing service can receive your money without requiring you to open one.
What a savings account actually does
A savings account is a bank product designed to hold money you are not spending right now. The bank pays you interest—a small percentage of your balance each month or year—in exchange for letting them use your money. The interest rate varies by bank and by how much money you have in the account. Most savings accounts earn less than one percent per year, though some online banks offer higher rates.
A savings account is separate from a checking account. Checking accounts are for money you use regularly to pay bills and make purchases. Savings accounts are for money you want to keep separate and let grow. Some banks require a minimum balance to open a savings account, and some charge monthly fees if your balance drops below that minimum.
If you are waiting for a refund or payment and you want to keep that money separate from your everyday spending money, a savings account can help you do that. But it is not the only way, and it is not required.
How refunds and payments reach you without a savings account
Direct deposit to a checking account is the fastest option if you have one. The money lands in your account within one to three business days of the refund or payment being processed. You do not need a savings account for this—a checking account works just fine. You will need to provide your bank's routing number and your account number.
A prepaid card works like a debit card but is not connected to a bank account. You can load money onto it, and some prepaid cards accept direct deposit. If your refund or payment is sent to a prepaid card, it arrives the same way as direct deposit to a bank account. Prepaid cards do charge fees—usually a monthly maintenance fee, a fee to load money, or a fee to check your balance—so read the terms before you choose one.
A paper check is mailed to your address. It takes one to two weeks to arrive, depending on mail speed. Once you have it, you can cash it at a bank, a check-cashing service, or sometimes at a grocery store or pharmacy. Check-cashing services charge a fee, usually a percentage of the check amount or a flat fee per check.
A money order is less common for refunds but can be used for some payments. You would take it to a bank or check-cashing service to convert it to cash or deposit it. Money orders take the same time to arrive as checks.
When a savings account makes sense for your refund or payment
If you receive a large refund or payment and you want to keep it separate from your regular spending money while you decide what to do with it, a savings account gives you a place to park it. The interest you earn will be small—on a $2,000 refund at 0.5 percent annual interest, you would earn about $10 per year—but it is something, and it keeps the money out of your checking account where you might spend it without thinking.
A savings account also makes sense if you are building an emergency fund and you want a dedicated account for that purpose. Separating emergency money from everyday money helps you avoid dipping into it for non-emergencies. Many people find this psychological separation valuable, even if the interest earned is minimal.
If you do not have any bank account at all and you want to open one, many banks will let you open both a checking and savings account at the same time. This can be useful if you want direct deposit for your refund but also want a place to save money going forward.
Opening a savings account if you decide you want one
Most banks let you open a savings account online or in person. You will need a government-issued ID, your Social Security number, and an initial deposit (which can be as little as $1 at some banks, though others require $25 or more). Some banks have no minimum deposit requirement.
Online banks often have lower fees and higher interest rates than brick-and-mortar banks, but they do not have physical locations where you can deposit cash or speak to someone in person. Traditional banks have physical branches but may charge higher fees and offer lower interest rates. Credit unions are another option—they are member-owned and often have lower fees than banks, though you may need to meet membership requirements.
Before you open an account, check whether the bank is FDIC-insured (for banks) or NCUA-insured (for credit unions). This insurance protects your money up to $250,000 if the bank fails. All legitimate banks and credit unions carry this insurance.
What to do if you have no bank account and do not want to open one
You can still receive your refund or payment. A paper check can be cashed at a check-cashing service, a bank (even if you do not have an account there), or sometimes at a grocery store or pharmacy. You will pay a fee—usually $2 to $10 depending on the check amount and the service—but the money is yours to take home in cash.
A prepaid card is another route. Some prepaid cards can receive direct deposit without requiring a bank account. You load money onto the card and use it like a debit card. Fees vary by card, so compare a few before you choose one.
If your refund or payment can be sent to a prepaid card, that is usually faster and cheaper than cashing a check, since direct deposit arrives in one to three business days and there is no check-cashing fee. However, prepaid cards do charge ongoing fees for things like monthly maintenance or balance inquiries, so the total cost depends on how you use the card.
Tracking your refund or payment without a savings account
Whether you use a savings account, checking account, prepaid card, or paper check, you can track your refund or payment the same way. For tax refunds, use the IRS Where's My Refund tool or your state tax authority's tracking system. For stimulus payments, use the IRS Get My Payment tool. For insurance refunds, contact your insurance company directly. For business refunds, check your email for tracking information or contact the business.
If you set up direct deposit, you can see when the money arrives by checking your account balance online or at an ATM. If you are receiving a paper check, there is no way to track it once it is mailed, so allow extra time for it to arrive.
Frequently Asked Questions
Can I receive a tax refund without a bank account?
Yes. You can request a paper check, which will be mailed to your address and can be cashed at a check-cashing service or bank. You can also set up direct deposit to a prepaid card that accepts direct deposit. Paper checks take one to two weeks to arrive; direct deposit takes one to three business days.
Is there a fee to open a savings account?
Most banks do not charge a fee to open a savings account, though some require a minimum deposit to start. Monthly fees vary—some banks charge $5 to $10 per month if your balance falls below a minimum, while others have no monthly fees at all. Read the terms before you open an account.
Will I earn enough interest in a savings account to make it worth opening?
Interest rates are low—most savings accounts earn less than one percent per year. On a $1,000 refund, you might earn $5 to $10 per year. A savings account is useful for keeping money separate and accessible, not for earning significant interest.
What is the difference between a checking account and a savings account?
A checking account is for money you use regularly—paying bills, making purchases, receiving paychecks. A savings account is for money you want to hold and let grow. You can receive direct deposit to either one. Savings accounts earn interest; checking accounts usually do not.
Can I use a prepaid card instead of a bank account?
Yes. Prepaid cards can receive direct deposit and work like debit cards. However, they charge fees for monthly maintenance, balance checks, and sometimes for loading money. Compare the total fees against a free checking account before you decide.