Chequing accounts and savings accounts are both foundational parts of personal banking. Having both kinds of accounts open in your name can help you meet basic financial goals. That includes everything from paying bills to saving for the future.
When you see terms like “savings account vs. chequing account,” don’t think of it as a debate. This isn’t about which account is better or more important. It’s all about understanding the differences between these account types. That way, you can use both of them to their fullest potential.
Let’s take a deeper dive into the question of chequing accounts vs. savings accounts in Canada. We’ll look at what makes them similar and what sets them apart from each other. Then, we can answer some common questions about both.
Chequing Account vs. Savings Account: The Basics
What is a Chequing Account?
In the big picture, you can look at a chequing account as the more active of the two account types. The Government of Canada explains it’s intended to help you manage your daily banking. It provides access to your money when you need it.
Enabling the use of paper cheques was a primary function of these accounts in the past. That’s where the name comes from.
One of the biggest differences between a chequing and a savings account is the number of transactions they allow:
- Chequing accounts, with a bank or credit union that offers free bank accounts, allow unlimited transactions without penalties or fees. That makes it a smart choice to use for the many deposits, debits, and withdrawals you may make each month.
- Savings accounts generally allow a limited number of transactions before charging penalties or fees. Savings accounts are intended as a place to keep funds in the long term.
If you’re making a payment and not using cash, a credit card, or mobile payment service (i.e. Apple Pay), you’ll probably use your chequing account.
You might share some account details to make a bill payment directly to a utility company, for example. You may also use a debit card, which is normally linked to a chequing account. You can also make a withdrawal from your account to get cash.
Chequing accounts, with a bank or credit union that offers free transactions, are also useful for accepting deposits because they feature unlimited transactions. That means you don’t need to worry about paying a fee to receive your paycheque or other income.
What is a Savings Account?
At the risk of being repetitive, savings accounts are intended for saving money. To encourage saving and provide a return to you, financial institutions allow you to earn interest on savings account deposits.
While the interest rates can be modest, they’re entirely passive income. You don’t need to do anything besides make a deposit to start earning.
View our current savings account interest rates.
That’s a major difference from chequing accounts, which often don’t provide interest-earning opportunities. As we mentioned previously, chequing accounts offer unlimited transactions instead.
Savings accounts aren’t the only option to consider for keeping money in an account in the long term, however. Learn more about Tax-Free Savings Accounts and how they compare to traditional savings accounts.