If you’re wondering what is a chequing account, there’s no need to feel embarrassed. While many recognize that a bank account is essential, the multitude of options available can be overwhelming. Gaining clarity on how a chequing account functions and how to make the most of its benefits can lead to significant savings in the long run.
What is a chequing account?
A chequing account represents the fundamental type of bank account offered by financial institutions. It’s important to note that in the U.S., these accounts are commonly referred to as checking accounts, but their functionality remains the same.
Despite their simplicity, chequing accounts are the most frequently utilized accounts, enabling users to receive their paychecks, settle bills, transfer funds, and more. They also provide convenient access to cash, allowing withdrawals at ATMs whenever needed.
Although many prefer traditional chequing accounts at physical banks, others might opt for online alternatives to benefit from lower fees.
What are the different types of chequing accounts?
Typically, individuals hold personal chequing accounts for their exclusive use. However, joint accounts are also available, ideal for families or couples, where all account holders can access the funds freely. Management of these accounts depends on the agreement among the members.
Furthermore, various tiers of chequing accounts exist across most financial institutions, commonly categorized as follows:
- Student account – Generally fee-free and designed to accommodate more frequent transactions typical for a student.
- Basic account – Involves a lower monthly fee, but limits users to around 12 transactions each month.
- Daily accounts – Usually allows approximately 25 transactions monthly, with fees ranging from $10 to $12.
- Unlimited – As the title suggests, this account includes unlimited transactions for a fee of $15 to $20 per month.
- Premium – Provides unlimited transactions and additional perks, such as complimentary credit cards and safety deposit boxes, but can cost around $30 monthly.
For context, only withdrawals count as transactions, including bill payments, ATM withdrawals, and transfers; deposits do not affect your monthly transaction count.
It’s apparent that accounts with a higher monthly fee typically offer more transactions and additional benefits. Many banks offer discounts, such as waiving the monthly fee for those maintaining a minimum balance or for customers using multiple products.
Though these fees can accumulate quickly, high-interest savings accounts in Canada are gaining popularity because they provide similar services without associated fees. However, be mindful that online high-interest savings accounts differ from those at traditional banks. To understand more, consult our guide on the differences between chequing and savings accounts.
What can you do with a chequing account?
A variety of transactions can be conducted through your chequing account. Many of these services come at no extra cost, while others may incur additional fees.
- Deposit cash and cheques
- Receive direct deposits from employers and government agencies
- Withdraw funds at ATMs, branches, and select merchants
- Make one-time payments for products, services, or bills
- Set up recurring pre-authorized payments, like mortgages
- Transfer funds between accounts
- Use INTERAC e-Transfer
- Conduct global money transfers
- Request bank drafts
What are chequing account fees?
One drawback of chequing accounts is the presence of numerous fees. While each individual fee may be modest, they can accumulate rapidly. Here are some common fees associated with chequing accounts:
- Monthly fees – These vary depending on the account type, fluctuating between $0 to $30 monthly.
- Transactions – Exceeding your monthly transaction limit could incur fees of $1-$1.50 each.
- INTERAC e-Transfers – Many accounts treat this as a regular transaction, with charges of $1-$2 for each one.
- ATM Withdrawal – Using ATMs outside of your bank’s network generally incurs fees ranging from $1.50 to $3.
- Paper statements – Receiving physical copies of monthly statements may cost you $2-$5, while online versions are free.
- Cheque orders – Requesting physical cheques typically costs around $50 for a book of 50.
- Non-Sufficient Funds (NSF) – Overdrawing your account may result in a fee of $40-$50.
- Overdraft protection – This optional service can cost about $5 per month or per use.
Are chequing accounts safe?
If your financial institution is insured by the Canada Deposit Insurance Corporation (CDIC), your chequing account is quite secure. The CDIC insures eligible deposits up to $100,000. While some might deem this limit low, it’s uncommon for individuals to hold such an amount in chequing accounts, with the expectation that excess funds would be invested elsewhere.
If, for any reason, you need to maintain a balance exceeding $100,000, you have options. The CDIC insures deposits held in individual and joint accounts, meaning that having both types can effectively double your coverage to $200,000. Additionally, these limits are per financial institution, allowing you to open multiple accounts for further protection.
Nonetheless, keeping excessive cash in chequing accounts isn’t advisable; investing is generally more beneficial.
Does a chequing account build credit?
Your credit score, a figure ranging from 300 to 900, assesses your creditworthiness—the higher the score, the more appealing you are to lenders. Unfortunately, a chequing account does not contribute to your credit score since it is not a credit-based product. If your goal is to enhance your credit score, consider obtaining one of the best credit cards in Canada or exploring no fee credit card options.
How to open a chequing account?
Opening a chequing account has become remarkably straightforward. Most banks offer online account setup, which typically takes only a few minutes. To initiate the process, you’ll need the following information:
- A valid email address
- Legal identification (such as a passport or Canadian driver’s license)
- Details about your employer
Alternatively, you can visit a branch to set up your account. If you’re opening a joint account, be prepared to provide information for all parties involved.
Additionally, many banks offer promotional bonuses for new chequing account customers. These bonuses may include cash rewards or other items, such as tablets. However, specific conditions may need to be met, like establishing direct deposits and setting up at least two recurring bill payments.