Steel is a hard magnetic material. When magnetized, it is not as strong as soft iron. But steel retains its magnetism, hence it is used to make permanent magnets e.g compass need, speaker, fridge door.
Iron is a soft magnetic material. It can be easily and strongly magnetised. But it loses its magnetism easily. Hence it is used to make temporary magnet e.g. Electromagnet.
Do remember that compass is like a freely suspended magnet. It is made of steel!