Chequing Vs. Savings Accounts. Which One Do I Need?

Having both a chequing and a savings account can help you manage your money, budget for expenses, and save for a goal or a rainy day.

If you’re new to the world of bank accounts in Canada, you may have heard about chequing accounts and savings accounts. But it may not be clear which one you need and what each type of account is used for. Here, we explore chequing accounts versus savings accounts, the benefits of each and how they can work together to help you manage your money.

What is a chequing account? 

A chequing account is a bank account you can use every day. Whether you’re buying essentials like gas or groceries, paying a cell phone bill or getting paid by cheque or direct deposit, your chequing account is the place where all of this will happen.  

You can open a chequing account at a bank or a credit union, and depending on where you open it, the account may have a different name. “Chequing account,” for instance, is a North American term (in the U.S., it is spelled “checking” account). In England, India, China or Australia, these accounts may be called “current accounts”a. Deposit accounts or transaction accounts are also names that reflect what the account is used for and are used in various countries around the world. 

What do I use a chequing account for? 

A chequing account is used for your basic money needs. For instance, you would use a chequing account to deposit money, whether you receive a physical paycheque from a job or get paid by direct deposit. The same goes if you receive government benefits, or cheques or transfers from family or friends – your chequing account would be the place where you receive this money.

On the flip side, you would also use your chequing account to spend money. For example, should you want to withdraw cash, pay a bill, make purchases using your debit card, send money to family or friends or write a cheque, you would use your chequing account for these types of transactions.

Your chequing account is where money goes in and money goes out as needed – it is the hub of your everyday money management.

What is a savings account?

While your chequing account is one you might use every day, a savings account is different. A savings account, versus a chequing account, is a good place to set money aside that you don’t want to spend rather than an account you would access regularly.

Savings accounts pay interest on the money you hold in the account (i.e., your balance). How much interest you earn depends on the size of your balance and the interest rate of the account.

What do I use a savings account for?

A savings account is a great place to park money you don’t need to use to pay for day-to-day life. You may wish to save up for a certain item (i.e., a laptop, piece of furniture, vacation), a longer-term goal (such as a car or a home) or for a rainy day. In fact, a savings account is the perfect place to set aside money for an emergency fund since your money is easy to access should you need it in a hurry.

Savings accounts come with a range of features. Learn more about the savings accounts offered by RBC and compare the options to see which one may be right for you.

What is the difference between a chequing and a savings account?

Chequing and savings accounts have different features because they serve different purposes. While a chequing account is meant for day-to-day transactions, a savings account is meant to park your money. 

The fees and the interest rates of chequing accounts vs savings accounts reflect their intended uses. For example, you typically don’t earn interest in a chequing account, but it will come with a number of transactions that are included every month. (There are some no-fee chequing accounts that are good for people who don’t make a lot of transactions. However, many chequing accounts come with a monthly fee that includes several features, as well as some all-inclusive chequing accounts that have no limits on the number of transactions). 

Savings accounts, meanwhile, typically don’t come with a monthly fee, and you will earn interest on the balance you hold in the account. You would deposit money into your savings account but only withdraw it when you’re ready to use the funds you have accumulated within it. In fact, because a savings account isn’t designed for day-to-day transactions, it will typically charge you for withdrawals or purchases made from the account. 

There are lots of terms that come with chequing and savings accounts, so let’s break them down so you know exactly what you would use each account for:

Debit transactions

A debit transaction is any transaction in which money is withdrawn from your account. For example, if you send someone an e-transfer or if your cell phone bill is withdrawn from your account each month, that is a debit transaction.

Interest rates

Interest is money that your bank (or other financial institution) pays you for holding your cash in a savings account. The amount you receive is based on the size of your balance, the interest rate, and how often the interest is calculated. The higher the interest rate, the more you can earn on your balance. With a savings account, interest is often calculated daily but paid monthly.

Different types of savings accounts offer different levels of interest rates – for instance, a basic savings account will pay a modest rate of interest on the money in your account, while a high-interest savings account will pay a higher rate of interest. 

Monthly fees

As mentioned earlier, most savings accounts don’t have monthly fees, but many chequing accounts do. The more basic the account, the lower the fee will be. Fees generally reflect the following:

• Number of debits included every month

• Number of Interac e-Transfers included

• ATM withdrawals

• International money transfers

• Rebates on a credit card

As you might expect, no-fee chequing accounts have the fewest number of features and included transactions. In some cases, monthly fees can be waived should you meet certain criteria set by the bank – like if you have multiple products with them or if you’re a student or senior.

Pros and cons of a chequing account

Let’s review the pros and cons of each to help you determine which account is right for you.

Pros

• Ideal for everyday purchases, such as paying bills or buying groceries

• A certain number of transactions are included every month

• Easy to access your money through the ATM, online banking or the bank branch

Cons

• Ideal for everyday purchases, such as paying bills or buying groceries

You don’t earn any interest on the money you have in your account

Pros and cons of a savings account

Pros

• You earn interest on the money you have in your account

• It’s easy to access your money when you need to, unlike with an investment

• You can keep the funds you want to save separate from your everyday spending money

Cons

• A savings account is not meant to be used as an account for day-to-day transactions. If you do use it, you may be charged some fees

Do I need a chequing or a savings account?

So which type of account do you need? Let’s walk through some scenarios:

• You may need a chequing account if:

  • You receive a paycheque, have day-to-day expenses and/ or bills to pay, want to send and receive transfers from your friends and family

• You may need a savings account if:

  • You want to set aside money to reach a financial goal or to have emergency funds on hand 

  • You will find it easier to save money if you can separate it from the money you need to use every day

The good news is that you don’t need to choose between a chequing and a savings account. In fact, the two accounts complement each other very well, and it’s a good idea to have both. Here’s how chequing and savings accounts work together:

• Having both a chequing and a savings account helps you budget and manage your money. It’s easy to transfer money from one to the other. 

• To make saving easier, you can set up regular automatic transfers from your chequing to your savings account. Having a chequing account and savings account with the same bank simplifies it even more. It becomes so easy, you don’t even think about saving!

• While a chequing account is a fundamental account that most Canadians need as a day-to-day account, a savings account doesn’t come with a monthly fee – so it doesn’t cost you anything to save

Different types of chequing and savings accounts are available to meet the diverse needs of Canadians. To help determine the best option for you, explore the personal accounts RBC offers.

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