Chequing vs Savings Account

Bank accounts are the gateway to an endless array of other financial services, including investments. But which type of account provides the best advantages and benefits? Chequing or Savings?

Topics:

Comparing Accounts

Pros and Cons

Bank Fees

Best of Both Worlds

Comparing Chequing and Savings Accounts

Although chequing and savings accounts offer separate features, they both serve to help consumers achieve their financial goals. 

A chequing account is sometimes compared to a wallet, while a savings account can be thought of as a piggy bank. Most consumers can benefit from some aspects of each kind of account.

Monetary milestones among consumers are as individual as their fingerprints. They evolve and change over time depending on current personal financial need. But there are a multitude of monetary tasks that are common to all people when it comes to money management. One way or another, all of these responsibilities can be completed using some type of chequing or savings account, or a combination of both. 

Chequing Accounts:

A chequing account is the best bet for people who make frequent transactions. More often than not, they are used on a daily basis for:

Paying bills

Buying necessities like groceries

Automatic debits for services (gym memberships, etc.)

Depositing paychecks or other payments

Debit card transactions and ATM withdrawals

Savings Accounts:

A savings account serves as a place to put away money that is not needed immediately. Consumers use savings accounts to do the following:

Stash emergency funds

Build wealth and assets

Make investments

Save for retirement

Fund future purchases (like a home)

These are just a few variances between chequing and savings accounts and not a detailed comparison. Bank accounts are available with an endless variety of options for consumers at all asset levels. Banks lure customers with everything from basic accounts with minimal balance requirements to full-service accounts with all the bangs and whistles preferred by the wealthy.  

Financial institutions are eager to show off what they have to offer. They employ displaying an entertaining online and television presence that showcases fabulous incentives to outshine the competition. This makes it very easy for consumers to compare bank products so they can make informative decisions about which financial package to choose. 

Pros and Cons of Chequing and Savings Accounts

Choosing one account over another does not depend on which one has the most advantages or the least drawbacks. Both types of accounts have their fair share of both sides of the coin. Because of this, more account holders opt to open both accounts and allow one account to make up for the shortfalls of the other.

• Quick and easy access to money

• Use of debit cards rather than carrying cash

• Payroll deposit and bill pay available

• Little or no interest earned

• Maintenance, low balance, and other fees

• ATM withdrawal limits

• Earn more interest than chequing accounts

• Withdrawals allowed sooner than with long-term investments 

• Can be linked to chequing account for overdraft protection

• Limits placed on number of monthly withdrawals

• Low interest on smaller balances

• Minimum account balances required

Some advantages and disadvantages are the same for both account types. For example, the Federal Deposit Insurance Corporation (FDIC) in the United States covers loss up to $250,000 on either chequing or savings accounts in an FDIC member institution. Since most banks offer chequing account holders a free savings account, having both accounts will not incur additional costs to customers. 

Bank Fees

Customers with any kind of account can expect to pay for services like cashier’s checks and wire transfers. Additional fees are charged to customers when bank account policies are not followed. Commonly, chequing accounts come with more fees since their daily use increases operating costs to the bank. Chequing accounts also have more moving parts than savings accounts. Chequing account fees are commonly charged for:

Monthly maintenance

Insufficient funds (NSF)

Out of network ATM withdrawals

Check printing services

Returned checks

There are some ways to avoid or reduce these chequing account fees. Most banks will waive the monthly maintenance fee if the customer maintains a required balance. Staying on top of the account balance prevents overdraft fees. ATM fees can be avoided by using machines within the network. 

Today, most people use their debit card to make purchases rather than writing checks. Also, numerous banks offer online-only chequing accounts. Although these accounts come with minimal or no fees, they do not have physical branches to do banking in person. Finally, the only way to avoid a return check fee is to take a check to the payor’s bank to cash it whenever feasible. 

Overall, average savings account fees do not amount to nearly as much compared to chequing. Some banks do charge savers a low annual fee or charge for minimum balances. For savers who consistently keep low balances, the penalty is usually a conversion of the savings account to chequing.

Should You Get a Chequing Account, Savings Account or Both?

It is said that bank accounts are like lending money to banks in return for its safekeeping until the customer is ready to withdraw. Both types of accounts have roughly the same number of advantages and disadvantages. Coordinating the benefits of owning both a savings and chequing account serves to ensure that all bases in the consumer’s financial playing field are covered. 

Customers with both accounts at the same bank can move money more efficiently. For instance, overdraft protection can prevent expensive NSF fees (and negative balance history) by automatically transferring money from savings to chequing if the balance falls short. Customers can also make saving cash run smoothly by setting up automatic monthly transfers from chequing to savings. Additional benefits of two accounts include:

• Incentives or bonuses for maintaining two or more accounts

• Programs that round up debit card purchases to the nearest dollar and puts the extra change into savings

• Cash rewards for customer referrals

• Waived or reduced fees for multiple account holders

The average consumer is most concerned about how to spend, save, and safeguard their hard-earned money, regardless of the impact on the world’s fiscal health. This can be achieved by asking purposeful questions about their individual needs. How often will funds need to be accessed? What are their short-term and long-term financial goals? What emerges from such self-reflection is the ability to make sound banking account choices tailor-made for personal monetary success. 

Helpful Links

1. Chequing Accounts: All chequing accounts aren’t created equal. Learn what is a chequing account, how does it work, the pros and cons of chequing accounts and more!

2. Savings Accounts: Various savings accounts exist and operate differently, learn which savings account is right for you, store your money in a safe place and earn a decent interest rate to boot.