Chequing Vs. Savings Account | What’s the difference?
When deciding between a chequing vs. savings account, you need to figure out what your needs are. Chequing accounts are typically used for day-to-day transactions from a most basic level, while a savings account is for savings.
Generally speaking, most people will have both accounts, but they may not have them at the same bank. Some people will use online banks for their savings accounts since they pay higher interest. That said, many people will keep all their accounts at a single financial institution to keep things simple.
As a consumer, you need to know the difference between checking and savings accounts so you can choose the one that’s most appropriate for you.
What is a chequing account?
Without a doubt, a chequing account is the most popular type of bank account. Most people will have their payroll directly deposited into this account, and then use it for their day-to-day transactions such as paying bills and buying groceries.
Chequing accounts are specifically designed for consumers to use as their daily accounts. That’s why they typically come with many transactions. They also allow you to quickly get cash as you can go to an ATM or in a branch to make a withdrawal.
Having a chequing account is hand because you can have access to the following transactions:
- Deposits – Cash and cheques
- Direct deposits – Payroll and government
- Cash withdrawals – ATMs, in-branch
- One-time payments – Restaurants, gas, bill payments, etc.
- Recurring pre-authorized payments – Mortgage, rent, wireless services
- Transfers – Between accounts, banks, INTERAC e-Transfer
Traditional brick-and-mortar banks typically have multiple chequing accounts available. The basic ones have a low or no monthly fee, but you’ll get a limited number of transactions. Premium accounts give you unlimited transactions, but the monthly cost could be $25+.
What is a savings account?
A savings account is very similar to a chequing account, but it’s meant for savings. Since these accounts are meant for savings, banks pay you interest as an incentive to keep your money in your account. The catch is, you typically will get very few transactions a month. Technically speaking, you could use your savings account for day-to-day transactions, but the amount you’d pay in fees wouldn’t be worth it.
Even though savings accounts at brick-and-mortar banks pay interest, it’s incredibly low. Some of them even require you to have a deposit of at least 5 digits before you make any interest at all. To be straightforward, it’s often not worth keeping your money in a savings account at a traditional bank. You’re better off using an online bank since they have the best high interest savings accounts in Canada.
Since online banks have no physical locations, they have lower overhead costs. That savings is then passed onto consumers in the form of no monthly fees and higher interest rates. Plus, you get unlimited transactions. Note that online high interest savings accounts can be linked to your regular bank account, so you can still access your money pretty easily.
What are the differences between chequing vs. savings account?
There’s no real comparison when it comes to chequing vs. savings account. Chequing accounts are best for day-to-day transactions, while savings accounts are for savings. That said, each account has a few differences that you’ll want to know about.
Transactions
Transactions are arguably the top consideration when looking at chequing vs. savings account. Transactions refer to any withdrawal from your account. That means payroll or ATM deposits would not count towards your monthly transaction limit.
With chequing accounts, you have different options. You can get an account that comes with a few transactions or ones that give you unlimited transactions. With savings accounts, you often get a limited number of transactions. Once you exceed that amount, you’ll probably pay $1.50-$2 for each transaction. If transactions are important, then use your chequing account.
Monthly fees
Traditional banks charge monthly fees for chequing accounts. They typically range from $10 to $30 a month. That said, some student and senior accounts have no fees. Overall, savings accounts usually have no fees at all, but you’ll get limited transactions.
Most banks will offer some kind of discount on your chequing account if you meet certain conditions. For example, you might have to maintain a minimum balance or have multiple products.
A savings account is best if you want to avoid monthly fees entirely, but then you’ll have limited access to your money. A better solution would be to use an online bank such as EQ Bank as your savings account and connect it to your regular chequing account. You could then move money between the two as needed.
Interest rates
There’s really no comparison when looking at the difference between checking and savings accounts when it comes to interest rates. Cheating accounts will likely pay you nothing. Savings accounts will pay you some interest, and even then, it can be low, and there might be a minimum balance requirement.
In Canada, high interest savings accounts are the way to go if you actually want to earn interest. However, the best rates are typically found with online only banks. In other words, even though your traditional bank may offer a savings account or high interest savings account, there will likely be better accounts available online.
Should I have a chequing or savings account?
The reality is that most people will have both types of accounts. Since chequing accounts give you significantly more transactions, most people will use them for their day-to-day needs. As a general rule, you should only keep as much as required to get your monthly fees waived in your chequing account.
As for a savings account, you would need it for savings. This is ideal for people who need a place to put short-term money, such as a home down payment or emergency fund. The important thing to note is that savings accounts as traditional banks are not very good, you’re better off using a high interest savings account from an online bank.
It’s worth mentioning that some people use online banks exclusively. This is possible since you get unlimited transactions and you get paid interest. That said, there is a downside. Only a few online banks offer a debit card, so it might not be so easy to access your cash.
One strategy is to have a regular chequing account and an online high interest savings account. You could then link the two accounts so you can move your money in between them as needed. Although transferring money from your online account to your chequing account typically takes two days, you could do an INTERAC e-Transfer to speed up the process.
