Chequing vs. savings accounts: your questions answered

While banks offer a wide variety of products to meet their customers' needs, basic bank accounts, in particular, tend to come in one of two flavours: chequing and savings. The question is: How do you know which one you need?

The differences between chequing and savings accounts and which one you should choose come down to a few basic factors. Here, we go over some key points and discuss why you might pick one or the other (or both!) to support your needs and goals. 

What’s a chequing account? 

In the days before debit cards, automated payments and Interac e-Transfers, cheques —those wallet-sized slips of paper you'd fill out and sign—were a common way to pay bills, exchange money and shop. And even though cheques themselves are less often used today, we still have accounts that we use for our everyday transactions—and we still call them chequing accounts. 

Why is a chequing account useful? 

Just like in the days when cheques were ubiquitous, chequing accounts are typically used for day-to-day banking: think shopping, paying bills, withdrawing cash and paying by Interac e-Transfer. Chequing accounts are often designed with frequent usage in mind, so you might get a large number of — or unlimited — transactions per month without additional fees or the ability to pay bills automatically. 

Many chequing accounts come with a debit card, which can be used to take out money from an ABM or for making purchases online and in-store, using money directly from the account. 

Plus, you can still get cheques for those rare occasions when you need them. It happens!

Is a chequing account a good place to stash money?

Chequing accounts are meant for everyday use, and it's important to keep enough money in yours to cover your day-to-day expenses so that payments go through and you can withdraw cash when you need it. But since chequing interest rates tend to be low (or nonexistent), they're not usually the best place to keep more money than necessary. If you have cash to put aside, another option like a savings account is probably a better choice. 

What’s a savings account? 

The main purpose of a savings account is in its name: to save money, putting it aside for emergencies or a future purpose. Unlike a chequing account, which is aimed at day-to-day usage, this kind of account is designed specifically as a place for your money to grow.

Why is a savings account useful? 

The purpose of your savings account is to help you save and grow your money. What those savings are for can vary: you might use your savings account to hold your emergency fund, to save up for upcoming travel, or money you plan to put toward education. You might even have multiple savings accounts, each one for different purposes. 

The idea is that a savings account is a place to put money aside that you're not expecting to use right away — and for that money to earn interest.

Tangerine Clients also get access to tools that help make it simple to grow their savings and reach their goals.

How much money should I keep in my savings account?

The amount of money you should keep in your savings account depends on what you're using it for. If it's your emergency fund, experts often recommend having enough money to cover three to six months' worth of expenses. If the money is aimed at a specific upcoming purchase like a home down payment, the amount of money you need will depend on your personal plans and goals. And if you're saving for longer-term needs like retirement, you might want to consider shifting from saving to investing. 

Whether you put all your savings in one account or have a separate savings account for each financial "bucket" depends on your personal preferences. 

What are the differences between chequing and savings accounts? 

Chequing and savings accounts have a lot in common — essentially, they're bank accounts where you can keep your money safe and access it when you need to. But there are some important differences to keep in mind, too. 

Debit transactions 

When researching bank accounts, take note of how many debit transactions are allowed per month. Often, chequing accounts will offer far more (even unlimited) transactions, whereas savings accounts may charge a fee, if transactions are permitted at all. 

A Tangerine Chequing Account, for instance, allows free unlimited Interac e-Transfer transactions and free withdrawals from ABMs on the Scotiabank or Global ATM Alliance networks. A Tangerine Savings Account, however, is built for savings and can't be used for transactions such as debit purchases, sending money by Interac e-Transfer or online bill payments.

The specifics vary from bank to bank and account to account, so be sure to read the fine print and ask questions so you can match the account to your needs.

Fees 

Different kinds of bank accounts charge different kinds of fees. For instance, you might pay a monthly fee for your chequing account, or a per-transaction fee. There are also fees for things like non-sufficient funds, which is when there's not enough money in your bank account to cover a payment obligation.

Since chequing and savings accounts have different purposes, they often have very different fee structures. Check to make sure you understand any fees associated with your accounts.

Interest rates

Generally, savings accounts will have higher interest rates than chequing accounts, if chequing accounts pay interest at all (most don't). This is because savings accounts are aimed at helping you save and grow your money.

Chequing vs. savings accounts: which one is best? 

Chequing and savings accounts each have their pros and cons. In fact, it's common to have both kinds of accounts and use them for different purposes. 

They can even work together. For instance, Tangerine Clients can set up a Money Rule, such as "Pay Yourself First," where a designated amount of money is transferred to a Savings Account as soon as a paycheque is deposited in their Chequing Account. That automatically takes the money out of the everyday transactions bucket and puts it in the longer-term savings bucket.

Here are some things to consider about the two kinds of accounts.

The right bank account to make your life easier

When you're organizing your finances, it can be tempting to take shortcuts and go with the first account option you find. But taking the time to consider the differences between chequing and savings accounts and how each one fits your personal needs is key to spending less on fees, earning more in interest and creating a banking setup that helps you reach your financial goals.