Chequing Vs. Savings Accounts: Which One Is Right For You?

Chequing and savings accounts share some features:

• They are widely available. You can find chequing and savings accounts at banks (online and traditional brick-and-mortar banks) and credit unions.
• They may have no monthly maintenance fee. There are plenty of fee-friendy chequing and savings accounts. These accounts, sometimes called no-fee chequing or no-fee savings accounts, don’t charge a monthly maintenance fee and may keep other fees to a minimum.
• They may have low minimum balance requirements. With so much competition for your business, it’s not difficult to find banks and credit unions with minimum balance requirements that make sense for your finances.
• They are insured. Generally, savings and chequing accounts are insured by the Canada Deposit Insurance Corporation for banks, federally-regulated credit unions, and loan and trust companies, up to $100,000 per depositor for each ownership category. Provincially-regulated credit unions and caisses populaires are insurance by provincial deposit insurance plans, such as the Credit Union Deposit Guarantee Corporation and the Financial Services Regulatory Authority of Ontario.

While both chequing and savings accounts can help you organize your finances, they have differences. These differences make chequing accounts better for everyday spending and savings accounts better for saving for short- and long-term goals.

In the comparison above, you can see how chequing accounts are the better choice for daily financial tasks since they offer debit card access and have no limit on withdrawals.

If earning interest is one of your primary goals, then a savings account will offer more opportunities to do that, as only a select few chequing accounts in Canada are interest-bearing.

There are different types of savings accounts that earn different interest rates, but also have different benefits and restrictions. For example, the RBC Day to Day Savings account currently offer only 0.01% interest, but the RBC High Interest eSavings Account offers 1.50% interest.

Related content: Best Savings Accounts in Canada

As a chequing account is meant to be a transactional account, very few pay interest. Those that do, may have specific monthly requirements you must meet before earning interest can be part of the conversation.

Related content: Best Chequing Accounts in Canada

Can Interest Rates on Chequing and Savings Accounts Change?

The interest rate on chequing and savings accounts are variable, which means they can fluctuate higher or lower than the rate offered when you open your account. When the Bank of Canada raises interest rates, your interest rate will likely increase—eventually. Conversely, you’ll probably see your APY drop if the bank that holds your account lowers their overnight interest rate.

There’s one standout reason to choose a savings account: earning interest.

If your goal is to build your savings, savings accounts are often far better places to keep your money than chequing. A savings account is the ideal place for money you don’t need to spend right now but can’t afford to lose. This makes them good places to keep things like your emergency fund and savings for a down payment on a house.

With a savings account, you also get to enjoy the benefits of compound interest, a perk you won’t get with a non-interest-bearing chequing account. Once the money you deposit starts earning interest, your account balance will grow. Then you’ll be earning interest on your interest—more commonly known as compound interest.

How Do I Find the Best Savings Account?

When looking for the best savings account, consider more than the APY. Search for an account that fits your goals and banking habits. Be sure to compare accounts at various banks (online and traditional brick-and-mortar) and credit unions or caisses populaires.

Also, keep in mind that you don’t need to choose just one account. For example, you could open a traditional savings account as your base account and a specialty savings account, such as a tax-free savings account, for longer-term goals.

If your goal is to use a bank account for daily transactions, a chequing account is the better choice.

Most chequing accounts come with a wide array of features designed to help you manage your money daily. For example, you can set up your chequing account for direct deposit of your paycheque and set up automatic withdrawals for your monthly payments, such as your mortgage, car loan or utilities.

Here are some common features that come with chequing accounts:

• Debit cards
• Paper cheques
• Direct deposit
• Interac e-Transfers
• Online bill payment
• Mobile cheque deposit
• Overdraft protection (but you may have to request this and pay extra for the feature)
• Balance and transaction alerts to help protect against fraud

How Do I Find the Best Chequing Account?

The best chequing account for you is the one that aligns with your personal preferences and financial goals. But there are a few features that the best chequing accounts have in common.

For example, the best chequing accounts typically offer low fees and plenty of perks. If an account you’re considering has a monthly maintenance fee, make sure it provides a way to waive the fee, such as with a minimum balance. Also, look for accounts and banks or credit unions with an extensive ATM network and reimbursement for third-party ATM fees. Though, reimbursement like this is rare in Canada. Overdraft protection and other features that help you manage your finances, like online bill pay and wire transfers, are helpful as well.

The best type of account is the one that fits your current financial goals and needs. Chequing accounts can help you handle all of your daily spending and recurring bills, while savings accounts can help you build your savings, protect you from unexpected expenses and help meet your savings goals.

But you don’t have to choose between the two. It’s often beneficial to have a both a chequing and savings account, as well as an investment account to save for the long term. Having multiple bank accounts can help with your daily and long-term finances.