You shouldn’t feel any shame if you’re asking what is a chequing account? Even though most people know they need a bank account, there are so many different types available these days. It’s no wonder people are confused about what they can get. Understanding how a chequing account works and how you can maximize the benefits can go a long way since it’ll ultimately save you money.
What is a chequing account?
A chequing account is the most basic bank account offered by financial institutions. It’s worth noting that some people refer to them as a checking account, but that’s an American term. That said, they operate in the same way.
Although chequing accounts are basic, they’re the most common account used by people since they allow you to deposit your payroll, pay bills, transfer money, and more. They also give you easy access to your funds since you can withdraw cash from your account via an ATM at any time.
While most people use chequing accounts available at a bricks-and-mortar financial institution, some have switched to online accounts for the lower fees.
What are the different types of chequing accounts?
Most people have an individual chequing account that’s only available to them. You can also get a joint chequing account that’s useful for couples and families. As you can imagine, with joint accounts, all members have full access to the funds in the account. How you manage your accounts is up to you.
In addition, there are different types of chequing accounts. Generally speaking, every financial institution offers different tiers of chequing accounts that look something like the following.
- Student account – This usually has no fees and comes with more than enough transactions than a student would need.
- Basic account – You’ll pay a low monthly fee, but you’ll probably only get about 12 transactions a month.
- Daily accounts – In most cases, you’ll get about 25 transactions a month, but your monthly fee will fall in the $10-$12 range.
- Unlimited – As the name implies, you’ll get unlimited monthly transactions, but you’ll pay $15-$20 a month.
- Premium – With premium accounts, you get unlimited transactions and possibly additional perks such as a free credit card, bank drafts, safety deposit box and more. Of course, you could easily pay $30 a month for this service.
For reference, a transaction only counts when you withdraw money. That includes bill payments, ATM withdrawals, and transfers. Any deposited money does not count towards your monthly transaction total.
As you’ve likely noticed, you’ll pay a higher monthly fee for accounts that give you more transactions and benefits. However, many financial institutions offer discounts. For example, some banks will waive the monthly fee if you maintain a minimum balance. On the other hand, some will give you a discount if you have multiple products with them.
There’s no denying that these monthly fees can add up and not everyone can maintain a minimum balance to waive their fees. That’s why the best high interest savings accounts in Canada have become popular. They offer similar services with no fees. One thing to note, online high interest savings accounts are different than savings accounts found at brick-and-mortar financial institutions. For reference, here’s a guide on chequing vs. savings accounts.
What can you do with a chequing account?
There are a lot of transactions you can do with your chequing account. Many of these services are included for free, but some may come with an additional charge.
- Deposit cash and cheques
- Direct deposit from your employer and the government
- Withdrawals in branch, at ATMs, and at select merchants
- One-time payments for goods, services, or bills
- Recurring pre-authorized payments such as your mortgage
- Transfers between bank accounts
- INTERAC e-Transfer
- Global transfer
- Bank drafts
What are chequing account fees?
The annoying thing about chequing accounts is that they come with a lot of fees. While each individual fee doesn’t seem like a lot, it adds up quickly. The following are typical fees you can expect with chequing accounts:
- Monthly fees – Depending on the type of account you have, this will range from $0-30 a month.
- Transactions – Once you exceed your monthly transaction limit, you can expect to pay $1-1.50 for each additional one.
- INTERAC e-Transfers – Most chequing accounts count INTERAC e-Transfers as a regular transaction, but some still charge $1-2 for each one.
- ATM Withdrawal – When using an ATM that’s not part of your financial institution’s network, you’ll likely pay $1.50-3 for each transaction.
- Paper statements – Online monthly statements are free, but if you want them to mail you a physical copy, you’ll likely pay $2-5 each month.
- Cheque orders – If you need physical cheques, you need to pay about $50 for 50 cheques.
- Non-Sufficient Fund (NSF) – If you withdraw more money than you have in your account, you’ll likely be charged a fee of $40-50.
- Overdraft protection – Although optional, this fee will typically cost you $5 a month, or $5 per use.
Are chequing accounts safe?
Assuming your financial institution is a member of the Canada Deposit Insurance Corporation (CDIC), your chequing account couldn’t be safer. CDIC insures eligible deposits up to $100,000. Some people may think that’s low, but most people wouldn’t have that much in their chequing account. The assumption is that any excess funds you have would be invested within your RRSP, TFSA, RESP, etc.
Now let’s say you do need to keep more than $100,000 in your bank account for whatever reason, you actually have a few options. CDIC insures deposits held in one name and accounts in more than one name. That means if you had a personal account, and a joint account, you’d have $200,000 in coverage. Also note, these limits are per financial institution, so you could open up multiple accounts if you want additional coverage.
Again, keeping that much cash in your chequing accounts likely isn’t the best idea since you’d be better off investing it.
Does a chequing account build credit?
In case you didn’t know, your credit score is a number between 300-900. The higher your credit score, the more creditworthy you are. This is important if you ever need a loan in the future since lenders typically check your credit score first to see if you’re creditworthy.
Unfortunately, your chequing account doesn’t help you build your credit score since it’s not a form of credit. If you’re looking to improve your credit score, consider getting one of the best credit cards in Canada, or one of the best no fee credit cards in Canada.
How to open a chequing account?
Opening a chequing account has never been easier. Most financial institutions allow you to do so online and it typically takes less than a few minutes. The information you’ll need to get your account set up include:
- A valid email address
- Valid ID (Passport or Canadian driver’s licence)
- Employer information
Alternatively, you can go into a branch to get your chequing account opened. If you’re opening a joint account, you’ll need the information from all the people who will be named on the account.
It’s worth noting that some banks have promos where you can get a welcome bonus when signing up for a chequing account. This bonus could be in the form of cash or even a tablet. That said, you’ll need to meet certain conditions for this offer. For example, you might need to set up direct deposits from your employer and at least two recurring bill payments.