What Is A Chequing Account? – Helpful Guide

Last updated on April 5th, 2020 at 12:32 pm

While “Checking Account” is most commonly used by the Americans, “Chequing Account” is used mostly in the Canadian banking system. Both ‘Chequing’ and ‘Checking’ are recognized in Canada but the former is more widely accepted across the country even though the latter is the original British English spelling.

Do you want to know what’s more fun? – In the UK and Australia, you don’t hold a ‘chequing’ account but a ‘cheque’ account. So basically ‘Checking’ is to the USA as “Chequing” is to Canada and for the purpose of this article, I would be using ‘chequing’ more often.

What Is A Chequing Account?

A chequing account is simply a deposit account that allows both withdrawals and deposits and it is held and operated in a financial institution. It is a kind of bank account that you can use to monitor and manage your cash flow from time to time on a regular basis. It is a critical aspect to consider for a healthy and financially stable life.

Chequing accounts are very liquid and can be run with cheques, automated teller machines (ATM’s), electronic debits, bill payments, electronic deposits, to mention a few.

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How Does A Chequing Account Work?

Chequing accounts can also be called transactional accounts or demand accounts. One striking difference between a chequing account and other bank account lies in the number of withdrawals and deposits permissible.

A chequing account allows for unrestrained deposits and several withdrawals while a normal savings accounts place a limit on both more often than none. The quid pro quo for the high level of liquidity is the interest earned- chequing account does not offer account holders as much interest as other bank accounts do.

Also note that is it important to keep a proper record of chequing account fees as they are scrutinized for overdrafts, writing too many cheques and, sometimes, letting the balance go below the standard minimum.

Chequing accounts can include, but are not restricted to:

  • Student account

  • Commercial or business account

  • Joint account

  • SME account

Do You Need A Chequing Account?

You might be wondering what set of people are entitled to a chequing account. Well, here is your answer- Everyone! No matter who you are, no matter the kind of job you do, no matter the size of your business, there is a chequing account for you.

You can set up chequing accounts at any bank branch closest to you or via a financial institution’s website or other online platforms. After or during the cause of setting up the account, you would be duly guided on what and what not to do but in the real sense you shouldn’t bother about the ‘what not’s’ because chequing account has little or no restrictions at all.

For fund deposits, you can achieve this by direct deposit by making use of the ATM’s or even over the counter. And also, to access your funds, you can either write a cheque, use the ATM or make use of your electronic debit or credit cards linked to your account.

Chequing Account Vs. Saving Account

In this section let us quickly look at the differences between a chequing and a savings account.

Chequing account has been made very convenient to use, thanks to the improvement and technological development of electronic banking. You can now pay for transactions and utility bills via electronic platforms, eradicating the need to write and mail paper cheques like the days of old. Even better, apart from making deposits or transfers, you can now configure your smartphone to automatically pay your routine monthly expenses.

If your chequing account has a relatively large balance, banks often run a ‘sweeping’ service to regulate the balance. This entails withdrawing all the surplus cash in your account and investing it in overnight and/or instant interest-bearing funds. It could be treasury bills, bonds and so on, and when the next business day starts the funds are paid back into the chequing account together with the interest earned.

Whereas when it comes to a Savings Bank Account, its quite simple to understand. You’ll need a savings account to park your funds in a safe place. As simple as that. Savings accounts are generally meant to just park your money and you have no utilization of it whatsoever. For example – You can park your emergency funds in a savings account. Coz, you are only going to touch it only during emergencies. 

Some of the Canadian banks such as Tangerine, Motusbank, EQ Bank and others pay you a small interest fee to keep your money in what we call High Interest Savings Account or HISA account. I’ve extensively covered the topic on the best HISA accounts you can open in Canada. Remember, HISA accounts can be opened without any annual fee and you can transfer money in and out from one bank to another with ease. For example, say EQ is an online bank only right, so in this case you can transfer your money to CIBC or TD and do the transactions. Also, the online banks offer free Interac e-transfers to make it easy and more convenient for your transactions. 

Types Of Chequing Accounts In Canada 

There are so many types of chequing accounts in Canada and each of them has its own distinctive unique feature but generally, they operate basically in the same way. The reason for this classification is simply to look at each of them and tell how they differ from each other. Every so often, it has been observed that each chequing account differs in pricing and terms and conditions.

Let us take a look at the five types below:

1. Personal Chequing Account

This is, no doubt, the most common and basic type of chequing account operative in Canada. It is run by only one individual and it caters to any and all of his financial needs. This is the easiest chequing account to set up and it is very advisable to start with a personal chequing account if you are still new in the business.

2. No-Fee Chequing Account

It is a zero fee-paying chequing account. This type is relatively new in the baking system and has caused a lot of suspicions and raised eyebrows. Frankly speaking, so many people do not still believe in the concept of a no-fee chequing account and have written the idea off.

But interestingly it is very much in operation in the country and has been of immense benefits to those who make use of it. These accounts provide a totally different approach to banking and investing that is free of cost and it has been advantageous to those who run such accounts.

The no-fee chequing account is a total package that comes with zero monthly or annual fees, unlimited electronic transfers and transactions, amongst many others.

Another distinct feature is that the accounts are typically provided by digital banks that most likely do not have physical branches but operate exclusively online. If you are a customer of this type of bank, you can access ATMs from another bank that is in the same ATM network.

3. Interest-Earning Chequing Account

This is a hybrid chequing account, meaning that it combines features from at least two different accounts to make up its own features. It is also known as a high-interest chequing account or a hybrid bank account.

Now here is the juicy part, it is a chequing account that offers a return interest rate greater than 1.05%. Too good to be true, isn’t it?

Also, on rare occasions, this chequing account combines the flexibility of a normal chequing account with high-interest rates. Please note that Canadian banks do not very often offer a chequing account that earns interest greater than 0.5% but fortunately some other options exist.

4. Joint Chequing Account

This type of chequing account is operated by two or more individuals, as opposed to a personal chequing account that permits only a single individual. It comes with a different type of flexibility that allows more than one account holder to use the same chequing account. This type of account will come in handy if you run a partnership with other people, it would allow all the partners equal rights to the account.

Also, this could be the perfect chequing account for you and your spouse; it would give you both, the opportunity to save and equal rights for withdrawals.

5. Student Chequing Account

Last but obviously not least is the student chequing account. So if you are in school or you have kids in school, this is surely your best bet for an account. But note that it is only suitable for students enrolled in post-secondary schools.

These chequing accounts are entirely free and usually do not place a lien on the number of transactions one can make. It also comes with some perks such as reward programs, scholarship competitions, discounts and so on.

If you are asking the best type of student account to create for your child or ward, I would say that it depends largely on the institution he/she attends or is planning to attend. But generally, they all offer good services and come with so many benefits so do well to get a student chequing account for your child/ward.

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How To Pick The Chequing Account For Your Needs?

There are a lot of factors to consider when choosing the chequing account that would suit you, your spouse, your kids or even the kind of business you are into.

The following factors have been carefully outlined to help in your decision-making process:

  • Monthly fees: Most chequing accounts, with the exception of zero-fee paying ones, come with a compulsory monthly fee charge. You might want to factor that in when making a decision.

  • Transaction limit: If you make a lot of transactions each month, an account with unlimited transactions might be your go-to option.

  • Customer service: You might want to consider an account with excellent customer service.

  • Overdraft protection: Getting an account with this option can protect you from paying unnecessarily expensive fines.

  • ATM network: If you withdraw cash often, choose a chequing account that has an ATM network close to places you frequent.

Conclusion 

There you go, that was my take on the “chequing account”. It’s relatively a simple topic, yet with so many immigrants arriving every day to Canada, thought let me write about this. 

Especially if you are from South Asian countries such as India, we have never heard of the term “chequing account” since birth. All we know is the savings account and deposits. Utilizing my space here to make sure everyone understands what the chequing accounts are in detail and helps one and all. 

I’ll be writing more about these basic topics in the coming days, as I feel basics are very important and not only product reviews or credit cards for example. 

Anyways, if you enjoyed the content here and found it helpful, please share it on social media and help spread the word. Also, do let me know your comments below. Thanks for reading! Bye now. 

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Sagar Sridhar

Sagar Sridhar is a personal finance blogger from Canada. His genuine passion for personal finance coupled with his unique style of writing is what stands out. Professionally, he is a computer engineer, agile certified and has a master's degree in Project Management. His writing has been featured or quoted in the leading Canadian publications such as Credit Canada and many other personal finance publications. While he is juggling between his day job and blogging, he is the main author on this blog and has miles to go before making the final pit stop.

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