Siddhi Bagwe
Beth Buczynski
There are two main types of bank accounts: chequing accounts and savings accounts. These come in various forms, such as business or student chequing accounts and high-interest or tax-free savings accounts.
To find out which type of account works best for you, we’ll explore their pros and cons and their unique characteristics.
Chequing accounts
What is a chequing account?
A chequing account is designed for your day-to-day banking needs, allowing you to send or receive money conveniently. With a chequing account, you can pay individuals and businesses via cheques, Interac e-transfers or a debit card, receive direct deposits, and withdraw cash at a branch or an ATM.
Usually, chequing accounts earn little or no interest, as they are not intended for savings and generating interest. Instead, the Canadian chequing accounts are essentially banking products used to hold money you can access quickly for daily spending.
Coast Capital Savings Chequing Account
Free Chequing, Free Debit, and More Account®
From August 13 – November 28, 2024: new members can get $150* when they open and use a Free Chequing, Free Debit and More Account®. *Conditions apply. See full terms and conditions.
Who is a chequing account for?
Chequing accounts are ideal for Canadians who want to pay bills, make purchases and have easy access to cash to cover their everyday expenses.
Types of chequing accounts
There are many kinds of chequing accounts, including:
| Accounts | Purpose |
| Joint chequing accounts | Accessible by more than one person. |
| Student chequing accounts | For those in post-secondary school, often with reduced fees or perks. |
| Seniors chequing accounts | Offer banking privileges to seniors. |
| U.S. dollar chequing accounts | To facilitate U.S. dollar transactions. |
| Business chequing accounts | Keep business and personal transactions separate. |
Pros and cons of chequing accounts
Pros
- Easy and fast access to cash via cheque, debit, branch or ATM withdrawals.
- Ability to conduct daily banking transactions like paying bills and making purchases.
Cons
- May incur monthly fees as high as $30, especially if you don’t keep the minimum balance.
- May charge fees to use ATMs that aren’t owned by your bank.
Questions to ask your bank about chequing accounts
Before switching banks or opening a new chequing account, consider asking your financial institution these important questions:
- What are the monthly maintenance fees?
- Is there a minimum balance requirement to waive monthly fees?
- Are there charges for overdraft or non-sufficient funds?
- What are the bank fees for additional services?
- Are there limits on the number of monthly transactions?
- Does the account earn any interest?
Personal considerations before opening a chequing account
When comparing chequing account options, think about factors such as:
- Transactions: Figure out how many transactions you’re likely to make each month. Look for institutions that offer ample free transactions, and low fees if you exceed that limit.
- Fees and limits: Consider online-only banks and credit unions, which often provide low-more free or no-fee chequing account options than mainstream banks, usually with no limits or minimum balance requirements.
- Access to cash: Think about how often you’ll need to withdraw cash. If you choose a chequing account at an online bank, make sure it has ATMs or shares an ATM network with other banks. Alternatively, check if your bank reimburses fees for domestic ATM withdrawals.
- Minimum balance requirements: Before opening an account with a minimum balance requirement, consider what else you could do with that money rather than letting it sit unused in chequing. Could it earn interest in a different type of bank account or an investment?
- Offers and promotions: Look for chequing account offers for introductory promotions, rewards or rebates. Some accounts include bonuses on other bank products, such a credit card or a high-interest savings account (HISA) that may complement your lifestyle and needs.
Savings accounts
What is a savings account?
A savings account is another kind of bank account where you can let money grow by accumulating interest. Unlike chequing accounts, savings accounts are not intended to be as liquid, meaning they don’t usually provide instant access to funds for daily spending.
Savings accounts usually don’t have monthly maintenance fees, but they tend to limit the number of monthly transactions. In some cases, you may only be allowed one withdrawal or transfer per month. Exceeding these limits can result in high fees.
Who is a savings account for?
Savings accounts are a good choice for people who are saving money for a specific financial goal and looking to accelerate their progress by earning interest on their deposits. These are also smart places to stash emergency funds, providing a financial safety net you can access when needed.
Kinds of savings accounts
There are many kinds of savings accounts in Canada — many more than chequing accounts, in fact. Types of savings accounts include:
| Accounts | Purpose |
| High-interest savings accounts (HISAs) | Earn a higher rate of interest than regular savings accounts. |
| Children’s savings accounts | Provide a way for minors to start saving early. |
| Joint savings accounts | Accessible by more than one person. |
| Tax-free savings accounts (TFSAs) | Allow tax-free withdrawals and growth on your registered savings. |
| Registered retirement savings plans (RRSPs) | Hold tax-deductible contributions and aid retirement planning. |
| Business savings accounts | Keep business and personal savings separate. |
» MORE: How to compare TFSAs vs RRSPs
Pros and cons of savings accounts
Pros
- Earning interest can help your savings grow faster.
- Certain savings accounts can help you accumulate money tax-free.
- Usually do not charge monthly maintenance fees.
Cons
- Typically allow very few withdrawals each month.
- Exceeding allowable withdrawals can result in high fees.
- Interest rates at major banks can be low and not conducive to growth.
- Interest earned on certain savings accounts is taxable.
Questions to ask your bank about savings accounts
Seek answers to these important questions before opening a savings account:
- What is the interest rate?
- How often is the interest rate calculated and compounded?
- How often is earned interest paid into the account?
- What fees are associated with this account?
- How many transactions are allowed per month?
- What are the available types of transactions?
Personal considerations before opening a savings account
When choosing a savings account, it’s worth comparing various account features:
- Interest rates: Interest rates for savings accounts in Canada can vary widely, so it’s crucial to compare interest rates from different financial institutions, such as Canada’s Big Six banks, credit unions, other local and virtual banks.
- Transactions: Review how many banking transactions you’ll likely need each month. Since many savings accounts limit the included free transactions per month and charge steep fees for additional withdrawals or transfers, select an account that accommodates your needs.
- Access to cash: Think about how you’d like to access your money. If you choose an online bank without ATMs, withdrawing funds might take longer or incur additional fees.
- Bonuses and promotions: Look for savings account offers with introductory promotions or bonuses that align with your lifestyle and boost your savings growth.
🤓 Nerdy Tip: Lesser-known banks, credit unions and online institutions often have lower operational costs, which may translate to higher interest rates and low or no-fees for their account holders.
Hybrid bank accounts
Hybrid accounts are designed to work like a chequing and savings account in one. They may combine the higher interest rates of savings accounts with the daily banking flexibility of a chequing account.
In Canada, hybrid accounts are mainly offered by online-only banks and are often fee-free or come with lower fees than traditional accounts. However, many of these neo banks don’t have ATMs. That means you may have to transfer your money to an external chequing account to withdraw cash.
Some online bank accounts, however, reimburse ATM fees when those fall within the limits set by the financial institution.
How to choose the right type of bank account
The best way to ensure you select the right type of bank account is to think carefully about how you will use it.
If you usually shop with a debit card, make frequent withdrawals, and want quick access to cash, you’ll need a chequing account. Figure out how many transactions you expect to make each month and how you feel about maintaining a minimum balance to avoid maintenance fees. These considerations will help you determine the most suitable chequing account.
If you’re saving up for a specific goal or want to earn interest instead of leaving your cash dormant in a chequing account, you may want to open a savings account. For more tax-efficient growth, you could explore a tax-free savings account.
No matter the type of account, you can choose to have multiple bank accounts. If you’re comfortable with digital banking, you may want to take advantage of the lower fees and higher interest rates offered by many digital banks.
About the Author
DIVE EVEN DEEPER
How Does an Online Bank Work?
Online banks typically charge lower fees and deliver better interest rates on savings than traditional brick-and-mortar financial institutions, but may lack certain products and services.
Sandra MacGregor
How Direct Deposit Works and How to Set It Up in Canada
Direct deposit is a fast, convenient alternative to waiting for a paper cheque to arrive in the mail, and it requires no work on your end after the initial setup.
Kurt Woock
Barry Choi
What Is a Bank Statement?
A bank statement is a document that summarizes account transactions over a set period of time, usually a month.
How No-Fee Bank Accounts Save You Money
No-fee bank accounts typically offer unlimited transactions with no monthly fee, making your everyday banking more affordable.