The 5 Differences Between Chequing And Savings Account

Is a Chequing account better than a saving account? Which is better between both? What are their peculiarities? We will explore the difference between chequing and saving accounts to answer this question. You should deduce which is better for you at the end of the article.

What Is A Chequing Account?

A chequing account, also known as a checking account, is a type of bank account that allows individuals or businesses to manage their day-to-day financial transactions. It is designed to access funds conveniently, primarily for making payments and withdrawals.

Here are some key features of a chequing account:

Deposits:

You can deposit money into your chequing account through various methods, such as cash deposits at the bank branch, direct deposits from employers, or electronic transfers.

Withdrawals:

With a chequing account, you can easily access your funds whenever needed. Common withdrawal methods include using a debit card at ATMs or merchants, writing cheques, and initiating electronic transfers.

Cheques:

Chequing accounts allow you to write cheques as a form of payment. When you write a cheque, the funds are drawn from your account and transferred to the recipient’s account when the cheque is processed.

Overdraft:

Some chequing accounts offer overdraft protection, which allows you to withdraw more money than is currently available in your account. This can help cover unexpected expenses, but overdrafts often incur fees and interest charges.

Transaction history:

Chequing accounts record your transactions, including deposits, withdrawals, and any fees or charges associated with the account. You can access this information through bank statements, online platforms, or mobile banking apps.

Account fees:

Chequing accounts may have various fees, such as monthly maintenance fees, transaction fees, ATM fees for out-of-network withdrawals, and overdraft fees. The fee structure can vary depending on the financial institution and the specific account type.

What Is a Savings Account?

A savings account is a bank account designed for individuals or businesses to deposit and accumulate funds while earning interest on the balance. It is primarily used for saving money rather than conducting frequent transactions.

Savings accounts are considered relatively safe. It is important to note that the interest earned may be subject to taxes, and the actual interest rate and terms may vary depending on the financial institution and account type.

Here are the main features of a savings account:

Saving and accumulating funds:

The primary purpose of a savings account is to help individuals save money over time. You can deposit funds into a savings account and let them accumulate over time. It is suitable for setting aside money for emergencies, future goals, or planned expenses.

Interest rates:

One of the critical benefits of a savings account is that it allows your money to grow through interest. The bank pays interest on the balance you maintain in the account. The interest rate can vary depending on the financial institution and the prevailing market conditions. Savings accounts generally offer higher interest rates than chequing accounts.

Access to funds:

While a savings account is primarily meant for saving money, you can still access your funds when needed. However, savings accounts usually restrict the number of withdrawals or transfers you can make within a specific period, such as a month. Exceeding the allowed number of withdrawals may result in fees or a reduction in interest rate. These limitations are in place to encourage saving and discourage frequent withdrawals.

Account fees:

Savings accounts generally have fewer fees compared to chequing accounts. However, some financial institutions may impose fees for specific services if certain conditions are unmet, such as falling below a minimum balance requirement. It’s essential to review the fee structure of a savings account before opening one.

Account statements:

Like other bank accounts, savings accounts provide account statements that detail your transactions, interest earned, and any fees or charges associated with the account. You can access these statements through online banking platforms, mobile apps, or bank branches.

What is the Difference Between Chequing And Savings Account

Chequing and savings accounts are two types of bank accounts that serve different purposes. Here are some of the main differences between the two:

Purpose

A chequing account is primarily used for daily transactions, such as depositing money, withdrawing funds, writing cheques, and making electronic transfers. It is designed for frequent and convenient access to your money.

A savings account is intended for saving money over a more extended period. It is generally used to accumulate funds and earn interest on the balance.

Access to funds

Chequing accounts offer more immediate access to your funds. You can withdraw money from a chequing account using a debit card, write a cheque, or make online transfers.

Savings accounts impose limitations on accessing funds to encourage saving. Withdrawals from a savings account are typically limited to a certain monthly number, and additional charges may apply for exceeding the limit.

Interest rates

Chequing accounts usually provide little to no interest on the balance, as they are primarily transactional accounts

Savings accounts are designed to help your money grow, offering higher interest rates than chequing accounts. The interest earned on a savings account is typically calculated based on the average daily balance and paid out periodically, such as monthly or quarterly

Account fees

Chequing accounts often come with fees for specific services, such as monthly maintenance, overdraft, and transaction fees.

Savings accounts usually have fewer fees, but there may be charges for excessive withdrawals or falling below a minimum balance requirement.

Purpose of transactions

Chequing accounts suit everyday expenses, bill payments, and regular income management. They are often linked to payment systems, such as debit cards and online banking platforms, making them convenient for day-to-day transactions.

Savings accounts, as the name suggests, are primarily for saving money, whether it’s for emergencies, future goals, or long-term financial plans.

Pros and Cons Of Chequing Account

Chequing account has its pros and cons. It would help if you went through them so that you can decide whether it is suitable for you or not.

Pros:

Convenient access to funds:

Chequing accounts provide immediate access to your money, allowing you to make payments, withdraw cash, and conduct daily transactions conveniently. This accessibility makes it easy to manage your day-to-day expenses and financial obligations.

Multiple transaction methods:

With a chequing account, you have various transaction methods. You can use a debit card at ATMs or merchants, write cheques, or make electronic transfers. This flexibility allows you to choose the most convenient method for different types of transactions.

Overdraft protection:

Some chequing accounts offer overdraft protection, which can be advantageous in emergencies or when you need to cover unexpected expenses. Overdraft protection allows you to withdraw more money than is currently available in your account up to a specific limit. However, remember that overdrafts often come with fees and interest charges.

Transaction history and records:

Chequing accounts provide detailed transaction history, which helps you keep track of your expenses, monitor your financial activity, and reconcile your records. You can access this information through bank statements, online platforms, or mobile banking apps.

Cons

Lower interest rates:

Unlike savings accounts, chequing accounts typically offer very low or no interest on the balance. This means that the money in your chequing account doesn’t grow significantly, and you miss out on potential interest earnings compared to a savings account.\

Account fees:

Chequing accounts often come with various fees. These may include monthly maintenance fees, transaction fees, ATM fees for out-of-network withdrawals, and overdraft fees. These fees can affect your account balance, especially if you frequently use certain services or fall below minimum balance requirements.

Limited saving potential:

While a chequing account allows you to hold and manage your money, it is not designed for long-term savings. The primary focus of a chequing account is on transactional needs rather than accumulating wealth. A savings account or other investment options may be more suitable if you want to save and earn interest.

Fewer savings incentives:

Chequing accounts generally lack the features and incentives provided by savings accounts to encourage saving. There are typically no withdrawal restrictions or transaction frequency limits, which might make spending money easier rather than saving it.

Pros and Cons Of Savings Account

Savings account comes with various advantages and disadvantages. Carefully review them below to examine whether it aligns with your goals.

Pros

Interest earnings:

One of the primary advantages of a savings account is that it allows your money to grow through interest. The bank pays interest on the balance you maintain in the account, which can help your savings grow over time. While interest rates may vary, savings accounts generally offer higher rates than chequing accounts.

Safety and security:

Savings accounts are typically considered safe and secure. They are usually insured by government deposit insurance schemes, such as the Federal Deposit Insurance Corporation (FDIC) in the United States or the Canada Deposit Insurance Corporation (CDIC) in Canada. This insurance protects your deposits, up to certain limits, in case of bank failures or financial instability.

Separate savings compartment:

A savings account helps you separate your savings from your day-to-day spending. By having a designated account for saving, you can more easily track your progress towards your financial goals and resist the temptation to spend your savings impulsively.

Limited access to funds:

Savings accounts often restrict the number of withdrawals or transfers you can make within a specific period, such as a month. This limitation can be beneficial as it encourages you to save rather than spend your funds impulsively. It helps foster discipline and ensures that your savings remain intact.

Cons

Lower liquidity:

While savings accounts offer a safe place to store your money, they may not provide the same level of liquidity as a chequing account. The withdrawal restrictions can make it less convenient to access your funds when you need them urgently. A chequing account may be more suitable if you anticipate frequent and immediate access to your money.

Lower interest rates:

While savings accounts generally provide higher interest rates than chequing accounts, the rates may still be relatively low compared to other investment options. If your goal is to maximize the growth of your savings, you may need to explore other investment vehicles, such as certificates of deposit (CDs) or mutual funds.

Account fees and minimum balance requirements:

Some savings accounts may have associated fees, such as monthly maintenance fees or charges for falling below a minimum balance requirement. It’s essential to review a savings account’s fee structure and balance requirements before opening one.

Inflation risk:

Over time, the purchasing power of your savings can be eroded by inflation. If the interest rate on your savings account is lower than the inflation rate, the real value of your savings may decrease. To combat this risk, consider investing in assets with higher potential returns, such as stocks or bonds.

What are the Best Chequing Accounts In Canada For 2023

Below are some of the best chequing accounts in Canada for 2023. They are as follows:

National Bank USD Progress Account

EQ Bank Savings Plus Account

Motus Bank No-Fee Chequing Account

EQ Bank Joint Savings Plus Account

Scotiabank Basic Plus Bank Account

TD Canada Trust TD Borderless Plan

Tangerine Bank No-Fee Daily Chequing Account

National Bank The Modest Chequing Account

First Nations Bank of Canada Value Chequing Account

What are the Best Saving Accounts In Canada For 2023

Below are the best saving accounts in Canada that are worth keeping:

CIBC TFSA Tax Advantage Savings Account

RBC Leo’s Young Savers Account

CIBC RRSP Daily Interest Savings Account

National Bank HISA: High-Interest Savings Account

TD ePremium Savings Account

CIBC eAdvantage Savings Account

RBC Day-to-Day Savings

RBC High-Interest eSavings Account

Conclusion

A chequing account is not better than a saving account, or vice versa. It all depends on what you want, your goal, and your preference. Ensure to compare account types from different banks before settling on one.