Chequing and savings accounts are two of the most common types of bank accounts in Canada, each serving distinct purposes. In this article, we will explore the key differences between these accounts, their advantages and disadvantages, interest rates, and more.
A chequing account, also known as a checking account, is a transactional account designed for daily financial activities. It is where your paychecks are usually deposited, and you can access your funds through various means, including ATMs. Chequing accounts typically have low or no transaction fees because they are intended for frequent use.
Canadian banks offer different types of chequing accounts, varying in terms of monthly fees, the number of free transactions, and interest rates. Specialized variants, such as student chequing accounts, joint accounts, and business chequing accounts, cater to specific needs.
A savings account is specifically designed to help you save money, whether for short-term or long-term goals. Unlike chequing accounts, savings accounts are not meant for daily transactions. They enable you to earn interest on your deposited funds, although interest rates can differ significantly among accounts. While many savings accounts do not charge maintenance fees, some may have associated costs.
Savings accounts often limit the number of monthly transactions allowed, with additional transactions incurring fees. These accounts come in various types, including basic savings accounts, business savings accounts, high-interest savings accounts (HISAs), and joint savings accounts.
Interest rates on chequing accounts are typically low or non-existent. However, some online chequing accounts offered by digital banks may provide a modest amount of interest.
Interest rates on savings accounts can vary significantly. Basic savings accounts may offer lower rates, while HISAs, such as the Motive Savvy Savings Account and the Saven Financial High-Interest Savings Account, can provide substantially higher interest rates. It’s important to note that some HISAs may require maintaining a minimum balance to access the best rates.
Ideally, you should maintain both types of accounts because they serve different financial needs. Use a savings account for long-term savings where you don’t require frequent access to funds. Simultaneously, a chequing account is essential for daily transactions, including purchases, bill payments, and debit card usage. You may even consider having one primary chequing account and multiple savings accounts for distinct purposes.
When choosing your accounts, consider factors such as monthly maintenance fees, interest rates (for savings accounts), and transaction limits. Online-only banks often offer lower fees and competitive rates, although they may not have physical ATMs.
By understanding the differences between chequing and savings accounts, you can make informed choices that align with your financial goals and needs.
