What Is A Chequing Account and Why Do I Need One?

When it comes to managing your bills, automating savings, and ensuring money is readily available when you need it, nothing works quite as well as a chequing account. You chequing account serves as the central hub for money coming in and going out of your account.

But not all chequing accounts are built the same. Some come with high monthly fees and transaction limits that can add up. And some chequing accounts or hybrid spend and savings accounts also let you earn interest on your money.

Here’s everything you need to know about chequing accounts in Canada, the different types available, and how to open one.

What is a chequing account?

A chequing account is a bank account designed to hold money for everyday spending. Most people have their paycheques directly deposited into their chequing accounts for easy access. Your chequing account likely comes with cheques and a debit card, so you can easily spend your money online or at a physical store.

This type of deposit account is also the account most people will use to pay their bills, like their mortgage, rent, utilities, debt payments, and more. You might open a savings account along with your chequing account so that you can easily transfer funds between the two.

Some chequing accounts are free, while others have monthly fees. Online banks often offer chequing accounts with no or lower fees, while traditional brick-and-mortar banks in Canada may charge you to hold a chequing account.

Most chequing accounts in Canada are federally insured by the Canada Deposit Insurance Corporation (CDIC) for up to $100,000 per account. This protects your money in the event of a bank failure.

Types of chequing accounts

There are several different types of chequing accounts available in Canada. Here are a few of the most common types:

Personal chequing account

The most common type of chequing account is a personal chequing account. A personal chequing account is an individual chequing account that’s used to access everyday finances, like paycheques.

Youth chequing account

If you’re under 18, you may be eligible for a youth chequing account. This type of chequing account has many of the same benefits as a personal chequing account, but may require an adult or guardian over 18 years old to be added to the account. Most youth chequing accounts are free.

Student chequing account

After you turn 18, you may be eligible for a student chequing account. These chequing accounts also tend to be accessible to help students save money on banking fees while they’re in college. You typically have to be enrolled in a post-secondary educational school, like a university, to qualify for this type of account, but every bank and credit union has its own rules for student accounts.

Senior chequing account

If you’re 60 to 65 or older, you might be able to sign up for a senior chequing account. This is another type of bank account that’s often free, to help seniors save money on bank fees during retirement. Some senior chequing accounts come with additional perks like teller assistance and lower-cost safety deposit box rentals.

Joint chequing account

If you and your spouse, partner, or roommate share finances, a joint chequing account might make sense. This account works similarly to an individual chequing account, except there are two or more account holders responsible for the account. A joint banking account can serve as a helpful way to pool finances for combined bills, like mortgage payments, utilities, or groceries.

Business chequing account

If you’re self-employed or own a business, a business chequing account lets you easily access your business’s income and expenses. It often comes with cheque-writing abilities and debit card access. Some banks and financial institutions offer additional business perks for business chequing accounts.

Online vs. traditional chequing accounts

You can open a chequing account at most financial institutions in Canada. But how you want to access your money, whether you need to deposit cash, or if you want in-person service are all factors to consider when choosing between a traditional or online chequing account.

Traditional and online chequing accounts have a lot in common. You’ll get access to your money through a debit card, you can set up direct deposits, and you can schedule online bill payments. Both traditional and online banks may have access to other banking products like savings accounts, tax-free savings accounts, credit cards, mortgages, and more.

A traditional chequing account is a chequing account held at a big bank, like Royal Bank of Canada, Toronto-Dominion Bank (TD Bank), or Scotiabank. These banks tend to offer chequing accounts with higher fees, minimum deposit or balance requirements, and little-to-no interest-earning ability on your deposits.

However, big banks have a few advantages. They can be convenient if you can access your money in a pinch. They provide in-branch services if you need to talk face-to-face with a teller. And they also offer mobile banking to stay competitive with online-only banks.

An online chequing account at a neobank or online-only bank may offer a few additional benefits. Online chequing accounts tend to have no or fewer fees, more online or mobile app features, more competitive interest rates on your deposits, and other helpful features like overdraft protection coverage.

While online banks don’t usually have physical branches, you may be able to deposit cash and withdraw money at an ATM. So, you’ll want to watch out for ATM fees, transaction limits, and any other accessibility issues that may make online banking more difficult for you.

Can I earn interest in a chequing account?

Yes, in some cases, you can earn interest on the money in your chequing account. Few traditional banks in Canada let you earn interest on your chequing account balance. However, some online banks and combined spending plus savings accounts let you earn interest on your money.

For example, KOHO’s combined spending and savings account allows you to earn up to 5% APY on your money.

While interest can help your chequing account balance grow even higher, it’s not the only feature you should look out for. Check the bank’s fees to ensure you aren’t spending more than you’re earning on your chequing account.

Do chequing accounts have fees?

Some chequing accounts have fees. Each bank has its own fee schedules and amounts, but here are some standard fees to watch out for:

Monthly account fees

Some banks, particularly big banks, charge monthly fees between $4 to more than $30 monthly for chequing account access.

You may be able to waive monthly account fees by meeting specific bank requirements, like maintaining a set balance amount or receiving a minimum amount in direct deposits each month. Online banks, however, tend not to charge a monthly maintenance fee.

Minimum balance fees

Some chequing accounts require you to pay a minimum balance fee if you cannot maintain a set deposit level. For example, a bank may require you to have $1,000 Canadian dollars in your account at all times. If your balance drops below this amount, you might be hit with a recurring or monthly fee.

Statement fees

Your bank may charge you a statement fee for your chequing account if you opt to receive a physical statement in the mail. This fee tends to run a few dollars and is often easily avoided by choosing to receive your statements by email instead.

Transaction fees

Many banks in Canada charge an excessive transaction fee if you go over a certain number of transactions during your monthly billing cycle. Each bank has its own rules regarding how many transactions you can make for free each month, so make sure you look into a bank’s limits before opening a chequing account.

ATM fees

You may be charged an ATM transaction fee if you need to withdraw cash from your chequing account via ATM. This fee varies depending on your bank, whether the ATM is in the network, and across ATM brands. On average, expect to pay between $1 to $9 Canadian dollars for ATM fees.

NSF fees

You may face a non-sufficient funds fee if you try to pay for a purchase with your debit card but don’t have enough in the bank to cover your transaction amount. Each bank has its own rules regarding NSF fees, so look into them before opening an account. NSF fees may run as high as $50 per transaction.

Overdraft fees

If your bank decides to cover a charge when you don’t have enough in your chequing account to cover it, you may face an overdraft fee. The transaction typically charges overdraft fees, though some banks limit the amount they can charge in one day. Banks with overdraft protection may help you avoid this fee, though you may spend a small monthly fee for this coverage.

Chequing vs. savings accounts in Canada

Both chequing accounts and savings accounts are popular bank accounts in Canada. While they can both be used to store your money and both are federally-insured, they have some key differences.

A chequing account is used to manage your everyday banking transactions, like buying food, putting gas in your car, and paying bills. It’s where your money comes into your account and is routed out to other accounts, like a savings account.

A savings account is where you’ll store money for different savings goals, like building an emergency fund to cover surprise expenses, saving for a big purchase like a car or wedding, or working towards other expenses like a family vacation or new appliance.

Most savings accounts come with the ability to earn interest, but high interest savings accounts can earn more than ten times the national average. Right now, some of the best savings accounts in Canada earn over 5% APY. That’s much more than the best chequing accounts in the country usually offer.

Savings accounts can come with other benefits, too. A tax-free savings account, for example, allows you to earn a certain amount of interest per year without paying taxes on the interest you’ve earned.

What to look for in a chequing account

When choosing a chequing account, there are a variety of features to explore. With more chequing accounts than ever available online, here are some factors to consider.

Low or no fees

If you don’t want to pay to access the money for your everyday banking transactions, look for a bank that has low or no monthly fees or account fees. Online banks and financial institutions tend to offer the least expensive chequing accounts, but you may find a big bank or local credit union that offers a no-fee chequing account.

Overdraft protection

Overdraft fees can pile up quickly if you miscalculate how much money is in your account. To avoid this situation altogether, look for a chequing account with overdraft protection. Every bank’s overdraft protection works differently. Some banks allow you to make your balance positive within a certain amount of time before charging a fee. Others might pull money from a linked chequing account to cover a charge.

Convenience and accessibility

A chequing account should make managing your money convenient and easy. But these words mean something different to everyone. If you tend to get paid in cash, a chequing account with physical branches and ATMs near you might simplify everyday banking. But if you’re paid online via direct deposit and rarely need cash, a bank with an easy-to-use mobile banking app and helpful online features might be a better fit.

Federal insurance

To ensure your money is protected for up to $100,000 by account type by the Canadian government, make sure the bank you open a chequing account with is a member of the CDIC.

Interest earnings

If you tend to carry a high balance in your chequing account or use your chequing account like a savings account, you might want to find a bank that offers interest earnings on this account type. Many online banks offer the ability to earn interest on your chequing account.

Other benefits

Be sure to weigh any other factors that might make a bank more appealing to you. If you are banking in person, make sure you know the bank’s branch hours. And if you’re banking online, ensure you know how to reach customer service.

Other features like the ability to get paid one to two days earlier and cashing cheques via your smartphone camera may also be appealing to you. Some banks also provide chequing account offers that can help you earn an account bonus to boost your deposit balance even more when you meet specific requirements.

How to open a chequing account

You can open a chequing account at a bank in Canada in person, online, or by phone. You’ll need proper identification to open an account.

• Step One: Choose a chequing account. Browse through different traditional bank accounts, online chequing account options, and credit union offerings to find the chequing account that best fits your needs.

• Step Two: Apply for the chequing account. You can apply in person at a bank branch or online at the bank’s website. You’ll need to fill out an application with some personal details, including your name, address, date of birth, and employment history. In some cases, you may be able to apply over the phone.

• Step Three: Provide identification. The bank will need to confirm your identity with a picture ID, such as your Canadian drivers license. You’ll need another form of identification, like your Social Insurance Number (SIN) card, recent statement from the Canadian government, or recent bank or credit card statements. If you’re not Canadian citizen, you may still be able to open a chequing account with your foreign passport.

• Step Four: Fund your account. If your chequing account requires a minimum deposit, you’ll need to fund it when you open your account. You can do this with cheque or cash if you’re at a bank branch. You can also have money transferred from another bank account. If your bank doesn’t have a minimum deposit requirement, you don’t need to fund your account right away.

• Step Five: Use your account. Once your account is open, you can begin writing cheques, using your debit card, setting up bill payments, or assigning direct deposits to your account.

Open a combined chequing and savings account with KOHO

You don’t have to choose between the convenience of a chequing account and the high interest rates of a savings account. KOHO’s hybrid spending plus savings account offers access to a prepaid Mastercard, as well as a virtual card so you can spend your money safely online. It also comes with the ability to earn up to 5% in interest, as well as 5% in cash back on eligible purchases.

While traditional chequing accounts won’t grow your credit score, KOHO’s hybrid bank account can help you boost your credit. You’ll also get access to your free credit score so you can check in on your progress. KOHO also offers services for businesses.

KOHO’s chequing account alternative comes with helpful features like overdraft protection. It’s a low-monthly fee account worth considering if you’re looking to replace your current chequing account, earn interest, and grow your credit score.

Find out more at koho.ca.