A chequing account can help you manage day-to-day banking in exchange for monthly fees. Most Canadians use a chequing account for their daily financial transactions.
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What is a chequing account?
Chequing accounts are a safe, convenient place to keep money that you plan to use for day-to-day spending or to pay bills over the short term. Most Canadians use a chequing account for daily financial transactions such as receiving paycheques by direct deposit, paying bills, or shopping.
You can open a chequing account at most banks and credit unions.
How chequing accounts work
Chequing accounts can be used for deposits, withdrawals, or making purchases by cheque or debit card. They are also typically used for withdrawing cash through the ATM (automated teller machine) or branch teller or online.
- Deposits – You can deposit any amount of money at any time. You can also get your employer to deposit your pay directly into your account.
- Withdrawals – You can get money out of the account easily and quickly. You can use a debit card to withdraw cash at a bank machine (ATM) or bank or you can write a cheque. You can pay bills online (either one at a time or through automatic monthly payments) and move money from one account to another. There may be daily limits on how much you can withdraw and the number of withdrawals.
- Interest – You will earn little interest, if any, on the money in your chequing account. Savings accounts pay slightly more interest.
- Pre-authorized debits – You can easily transfer money from your account automatically each month to pay bills or to save and invest. Set up monthly payments online timed to when your paycheque is deposited, to make it easier.
- Debit card – These cards typically come with chequing accounts as a way to pay for items when shopping. You can also use them get cash when you shop in a store that displays the Interac logo. The money is taken out of your bank account right away, unlike a credit card which you still need to pay off later.
- Fees – The amount you’ll pay in fees will vary, depending on the type of account you choose. Check the account information when you sign up, so you won’t be surprised. There may be a monthly or annual fee for the account, and additional fees for specific kinds of transactions.
- Protection – Your money is protected, up to set limits, through the Canada Deposit Insurance Corporation (CDIC). This doesn’t apply to U.S. dollar accounts.
- Online and telephone banking – You’ll normally be able to manage your account online or over the phone, without needing to go into a bank branch.
Chequing accounts are better for spending than saving
If you don’t need the money in the next few months, look for a short-term savings option that will pay you a higher return. Learn more about savings accounts.
What are the types of chequing accounts?
There are two main types of chequing accounts:
- Regular chequing accounts
- You may earn a small amount of interest.
- You may be charged either:
- a fee each time you pay with a cheque, use your debit card or withdraw money from an ATM or teller.
- a flat monthly service charge that allows you to make a certain number of transactions.
Some accounts will waive the monthly fee if you keep a minimum monthly balance.
- Combined chequing and savings accounts
- You may earn a little more interest than with a chequing account.
- You can get your money quickly and easily.
- You can write cheques. But you will often pay higher fees for writing them.
What fees do you pay with a chequing account?
Most accounts charge fees either to hold the account, or for specific transactions, or both. Make sure you know what fees you will pay before you open an account — and don’t pay for services you don’t need.
Some banks offer no-fee accounts, in return for a limited number of transactions. Ask what options are available from your bank.
There are four types of chequing account fees:
- Transaction fees – You may be charged when you make purchases with a debit card, withdraw cash, or pay bills. If you have a lot of transactions each month, it may be cheaper to pay a flat monthly fee.
- Service fees – You may be charged when you move money between accounts, update your balance or have the bank mail your cancelled cheques and monthly statements.
- Minimum balance fees – You may be charged a fee if your account balance falls below a certain amount. If your balance stays above the minimum, you may pay no fees.
- Fees for NSF cheques – You will be charged an NSF (not sufficient funds) fee if you write a cheque, and you don’t have enough money in your account to cover it. This is also known as bouncing a cheque. It is illegal in Canada to write a cheque when you know it’s going to bounce.
If you’re unhappy with the amount of fees you’re paying for your chequing account, consider your needs. Do you need to:
- Write cheques or pay bills online?
- Make frequent deposits or just a couple each month?
- Take care of your banking on the Internet, use your debit card or go to a bank branch?
Find out if you are being charged for services you don’t need. It may save you money to switch to a different type of account.
Many financial institutions offer special chequing account packages for a monthly fee. Find out if a package will be cheaper than paying for each transaction separately.
A chequing account is a safe, convenient place to keep money that you plan to use for day-to-day spending or to pay bills over the short term. Chequing accounts:
- Can be opened at most banks and credit unions.
- Let you deposit any amount of money at any time.
- Allow you to get your money out quickly and easily.
- Earn very little interest.
- Have varying fees depend on the chequing account type.
- Always compare chequing accounts before you choose one.