A chequing account is generally your “main” bank account.
It’s where you store money to conduct your regular, day-to-day transactions, such as grocery purchases and utility bill payments.
It’s also likely the account you use to initiate money transfers and receive your paycheque.
3 Best Chequing Accounts in Canada
Tangerine offers a no hassle chequing account with an unlimited number of debit purchases, bill payments, pre-authorized payments and Interac e-Transfers. As a digital only bank, they’ve become a premier choice amongst Canadians looking for a no frills option.
The RBC Day to Day Banking account is a great option from a big bank. With a monthly fee of only $4, which can be reduced to $0 by joining the RBC Value Program, no minimum balance required, 12 debits included each month and free Interac e-Transfers, RBC has a truly competitive option available to Canadians.
For those who are transacting quite frequently, the TD Unlimited Chequing Account provides unlimited transactions if you keep a minimum balance of $4,000 in the account. If your balance dips below, you’ll pay $16.95 a month for the account. Perks include a first year fee rebate on select TD Credit Cards and no fees from the TD side when using any ATM.
How Does a Chequing Account Work?
A chequing account allows you to make payments, receive money, and store money electronically.
Your chequing account number identifies your specific account and is used to process transactions. It consists of three components:
- Institution number – the unique three-digit code associated with your bank
- Branch transit number – the five-digit code associated with a specific bank branch
- Bank account number – the seven-to-twelve-digit code that identifies your chequing account.
A chequing account is used with a debit card, a physical payment card linked to your chequing account.
Using the card at a payment terminal deducts money directly from your account.
With this setup, you can:
- Arrange pre-authorized payments
- Withdraw cash from an ATM
- Make one-time in-store purchases
- Accept funds from an online payment processor like PayPal
- Send money to a friend or family member via Interac e-Transfer
- Accept direct deposits from your employer
- Conduct transfers between different accounts you hold at the same institution
- Write or deposit a cheque
Key Components of a Chequing Account
Below is a table of the key components that constitute a chequing account:
|Minimum Deposit||Usually, no minimum deposit is required to open and maintain a chequing account.|
|Service Fees||Chequing accounts come with various fees. The most common is the monthly maintenance fee, which usually ranges from $0 to $30 per month, depending on the services offered.|
|Interest Rate||Chequing accounts usually earn between 0% – 0.10% in interest annually.|
|Debit Transaction Limit||A typical chequing account provides you with a number of free transactions per month, but premium accounts can offer unlimited monthly transactions.|
|Interac e-Transfer Limit||Most chequing accounts offer free and unlimited Interac e-Transfers.|
|Overdraft Protection||Overdraft protection allows you to spend more money than they have in their chequing account by borrowing funds from their financial institution (albeit at a high-interest rate). Overdraft protection is a standard feature on all but the most basic chequing accounts.|
|Perks||Many financial institutions offer sign-up cash bonuses and temporary higher interest rates when you open an account with them. Others offer cash back, points, and miles on eligible purchases.|
Advantages of Chequing Accounts
- A flexible and convenient way to perform everyday transactions: bill payments, online money transfers, purchases, cash withdrawals, etc.
- A safe and secure place to store your money
- You can conduct many transactions per month
Disadvantages of Chequing Accounts
- You typically earn little or no interest on the money sitting in your account
- They offer fewer fraud protection features than other payment methods like a credit card
- You may have to pay a steep monthly fee to maintain your account
The Canadian Deposit Insurance Corporation (CDIC) protects up to $100,000 that you hold in your chequing and savings accounts combined at the same institution, in case of a bank failure.
What’s the Difference Between a Chequing and Savings Account?
On the surface, a chequing account and savings account seem indistinguishable, but there are some crucial differences between the two.
1. Primary Purpose
A chequing account is a place to hold money to pay for everyday essentials like food, rent, and fuel – basically anything that’s part of your regular budget.
In comparison, the chief purpose of a savings account is to set aside funds to help pay for a significant future expenditure, like a home renovation or vacation or to invest.
It’s also an ideal place to keep money in reserve for emergencies.
Since a chequing account stores readily accessible money for spending, your financial institution pays little interest on your balance.
Conversely, savings accounts always reward you with interest on your idle funds since it functions as a tool to save and grow your money for the long term.
3. Transaction Frequency
A chequing account allows you to conduct many transactions each month, usually free of charge.
However, each financial institution has different policies regarding fees associated with transactions.
On the other hand, a savings account permits fewer transactions– you’ll incur a fee if you transfer or withdraw your funds often.
The reason is that it’s designed to lock in money for an extended period rather than allow you to spend it freely.
4. Maintenance Fee
Chequing accounts typically charge a monthly maintenance fee, given the high frequency of transactions it accommodates.
Usually, the greater the number of transactions performed, the higher the fee.
However, many financial institutions waive it if you maintain a specific minimum balance.
Savings accounts typically do not have a monthly fee.
However, you can expect to pay transaction fees if you exceed your monthly transfer/withdrawal limit.
Types of Chequing Accounts
There are various types of chequing accounts available:
1. Standard Chequing
This basic, no-frills chequing account is the most common one you’ll encounter.
It’s suitable for a single user and allows for a wide range of daily transactions.
2. Joint Chequing
A joint chequing account is shared by two or more people who hold equal ownership rights and responsibilities over the account.
It’s suitable for married/common-law couples and families.
3. Interest-Bearing Chequing
A type of chequing account that earns the holder a small amount of interest.
4. Student Chequing
This chequing account is tailored to young people.
Financial institutions typically waive the monthly fee for student accounts.
5. US Dollar Chequing
This chequing account holds exclusively American dollars, helping users avoid conversion fees and unfavourable exchange rates.
TD allows joint chequing accounts with up to nine people listed as account holders.
How to Open a Chequing Account
If you’re a Canadian resident, you’ll face virtually no hurdles in getting a chequing account up and running.
You can sign up for one with a financial institution regardless of your credit score or employment status.
You can open an account in person at a local branch of a bank or credit union.
The customer service representative will ask you to present two pieces of government-issued identification.
You’ll also need to provide personal details like your full name, address, phone number, and possibly your social insurance number (SIN).
Once they verify your identity, they’ll set you up with an account and provide you with your debit card.
Alternatively, you can apply for an account online; it usually takes only a few minutes to complete the necessary steps.
Your financial institution will then send you a package with documents that confirm your account along with your debit card, which you’ll have to activate before using.
You must be at least 18 years of age to open a chequing account in Canada.
If you’re under 18, you can ask a legal guardian to open an account with you but be aware that each financial institution has a minimum age requirement for account holders.
Frequently Asked Questions
- Should I open a chequing account?
A chequing account yields valuable benefits when it comes to your finances, so you should have at least one.
It’s a flexible and convenient tool that allows you to perform various transactions frequently at a reasonable cost.
You can make purchases online and in-person, send and receive money, arrange pre-authorized payments, withdraw cash from an ATM, and more.
Keeping your money in a chequing account also minimizes the risk of theft, and you benefit from CDIC protection.
- Is my debit card tied to my chequing account?
Yes, your debit card is linked directly to your chequing account. When you swipe, tap, or insert your debit card at a payment terminal, your card deducts funds from your chequing account to pay for the purchase.
- How much money should I keep in my chequing account?
There are no set rules regarding the amount of money you should keep in your chequing account. Instead, it comes down to a personal preference based on your budget, goals, and lifestyle.
In general, you should keep enough to cover at least one month’s worth of your regular expenses, plus a little extra as a cushion to cover any shortfall.