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What is a chequing account?

Chequing accounts (or checking accounts) are the mainstay of personal banking all over the world.

They provide a secure place for you to keep your most liquid asset: the cash you spend on a daily basis.

Your chequing account is linked to a debit card, which can be used to withdraw cash or make in-store purchases.

Chequing accounts are also used to receive recurring deposits, like your paycheque.

Chequing accounts are not intended to store large sums of money for extended periods of time (see Savings Accounts), and as a result, they do not accrue much interest.

What are chequing accounts used for?

Chequing accounts are used for regular and recurring cash transactions. Examples include:

Withdrawing cash from an ATM.

Buying something in a store using your debit card.

Depositing a paycheque.

Sending an email money transfer, known in Canada as an Interac e-Transfer.

Handling recurring pre-authorized payments, like a phone bill or gym membership.

What are chequing accounts not used for?

Chequing accounts are not designed to hold large amounts of money for a long period of time. Many chequing accounts do not accrue interest, and if they do, it is rarely more than 0.05%.

If you receive a large sum through an inheritance or other channel, consider putting it into a high-interest savings account, TFSA, GIC or RRSP. All of these offer significantly higher returns than the meagre interest offered by chequing accounts.

You can use our Savings Calculator to work out how much you stand to make, depending on your balance and rate of return.

Are all chequing accounts the same?

All chequing accounts are designed to do the same thing, which is facilitate lots of small transactions.

However, different financial institutions have different rules and fees dictating the use and popularity of their chequing accounts. Before deciding on a chequing account, consider these questions:

Is there a monthly fee?

Some chequing accounts charge a monthly fee, typically around $15. This fee is often waived if you can maintain a relatively high account balance, as the bank is able to make interest off your money. However, maintaining the balance can be tricky, and if you dip below it at any time, the monthly fee becomes applicable.

Some chequing accounts are free to use, and do not charge any monthly fee. You are not required to maintain a minimum balance for these accounts.

Does the account allow unlimited transactions?

Some chequing accounts limit the number of transactions you can make. For example, they may limit you to a certain number of withdrawals each month, and if you exceed this limit, they will charge you for each additional transaction.

Some chequing accounts do not limit the number of transactions you can make. These are known as "unlimited" chequing accounts.

Are the ATMs conveniently located?

Canadian banks charge a fee if you use an ATM that is not affiliated with them. This fee is typically $3 per withdrawal. It does not make sense to open a chequing account with an institution if you do not live or work nearby. $3 is not much as a one off expense, but if you are withdrawing cash once or twice per week it will quickly add up.

Are there other fees to consider?

Do you need a cheque book? Do you frequently make email money transfers? Some banks charge extra for these features.

How much will the bank charge in the event of overspending?

A chequing account is not a line of credit, and your debit card is not a credit card. Unless you have overdraft protection, all banks will charge a daily fee if your balance dips below zero. The exact fee depends on your financial institution.

If you write a cheque, but do not have the money to cover it, the cheque will bounce and your bank will charge you an NSF fee. Again, the specific charge depends on the bank.

Why consider changing chequing accounts?

For many of you, opening a chequing account was your first step into the world of personal finance.

Your parents might have opened it for you when you were a child. This account lay dormant for a few years, save for the occasional deposit of some birthday cash, and then kicked into gear as you matured, gained employment, started receiving paycheques and began spending more.

Next thing you know, the same bank is offering you a cheque book, a savings account, and a credit card. As you get older they set you up with a mortgage adviser and want to talk about life insurance. By now your whole life is tied up with this institution, and all because your parents got a free toaster for opening an account with them forty years ago!

Savvy Canadians are good at seeking out deals when it comes to credit card rewards, mortgage rates, and other financial products, but the humble chequing account is often overlooked. It just sits there in the background, facilitating our daily lives, but rarely doing anything wrong enough for us to consider changing it. Besides, switching banks sounds like a hassle, and what difference does it really make?

Well, consider the average monthly fee of $15.95 per month. If you pay this for 10 years, it comes to $1,914. You could have saved almost two thousand dollars by using a no-fee account during this time.

All chequing accounts have their pros and cons, but it is never too late to shop around and find the best deal. Ratesupermarket.ca works with Canada's most trusted financial institutions. Compare chequing accounts today and start saving more of your hard-earned cash.

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