Simply put, a chequing account is a type of bank account where you can hold and spend your money. You're probably using the humble chequing account every day for things like paying rent or buying groceries, but when it comes to finding the right account for you, there's no one-size-fits-all.
When you’re doing some ill-advised late-night online shopping, paying for groceries with your debit card, or depositing your latest pay cheque, you’re probably using a chequing account.
Because your money is easily accessible in a chequing account, it’s a great place to park cash you’ll need for everyday spending and regular expenses, like bills, rent, groceries, and that large iced coffee you desperately need every morning. Since there are not many restrictions to accessing your money, it’s a convenient solution for storing money that you want to transfer, use, or withdraw almost instantaneously.
The name of the account comes from the fact that you can draw from the account by writing physical cheques to people and businesses, although these days most people simply use their debit card and e-transfers to move funds around and buy stuff. But the name stuck.
Some chequing accounts allow you to earn interest on the cash you have stored in the account—but the rates will be low, even lower than they usually are with savings accounts (although there are some high-interest savings accounts that offer above-average rates).
Although opening a chequing account is usually easy, you’ll still want to inquire about fees before choosing what institution you’ll open an account with. The most common fees you’ll encounter with a chequing account are monthly fees. You might also come across ATM fees for out-of-network ATMs, and transfer fees. A brick-and-mortar bank, especially a large national one, will usually charge a monthly fee for its chequing accounts, although some banks will waive the fee if you maintain a certain minimum account balance or make regular direct deposits. Overdraft fees can be really steep, so it’s worth inquiring whether your bank offers overdraft protection for your account.
What is an online chequing account?
With the proliferation of digital banks, the online chequing account is becoming more and more common. The main draw of online chequing accounts is its convenience and low cost. You can sign up for an account online, usually for free, from the convenience of home with nothing more than an internet connection and some government issued ID. And since there are no overhead costs, there are usually very low or no maintenance fees and overdraft fees that are less than those of brick-and-mortar banks.
Online chequing accounts will often have features like free money transfers, easily set-up automated transfers, and user-friendly apps.
What is a business chequing account?
Businesses need easily accessible funds as much as people do. Just like a personal chequing account, a business chequing account gives specifically authorized individuals access to the funds, but it belongs to the business itself and all transactions are part of a business’s financial activities. However, the requirements for opening one are a bit different from those of a personal chequing account.
Business chequing accounts usually come with higher fees than you’d be charged for a personal account, due to the greater amounts of money involved and the higher transaction volume. If you want to open a business chequing account, brink-and-mortar banks will require more official documentation to prove the existence of your business, including a business license and your business’s tax ID.
A business chequing account is helpful for keeping your business expenses and other financial records all in one place. This is particularly important for tax purposes. (A business account should always be kept separate from a personal chequing account in order to avoid any accounting tax headaches.) A business chequing account will also let you accept payments in credit and, on a whole, add legitimacy and professionalism to your enterprise.
Chequing account vs. savings account
While chequing accounts are necessary for everyday transactions, a savings account is another important financial tool.
With a savings account, you’re putting aside money you don’t immediately need so that it can accrue interest and grow as you continue adding to it. You’re gaining interest on your savings account because you’re allowing the bank to borrow that money for its own transactions.
A savings account is particularly useful for short to medium-term savings goals, such as creating an emergency fund, saving up for a vacation, or building up enough capital to start investing more seriously. Unlike chequing accounts, savings accounts don’t always allow unlimited transactions. Many savings accounts will limit the number of withdrawals you can make per month, and you can’t really pay bills with a savings account since there’s no debit card that goes with it. So if you want to use a savings account efficiently, we recommend doing some research on finding the highest interest rates and lowest fees and setting up regular automated deposits so that your money can grow undisturbed.
