Would you want to know about savings vs chequing accounts? From what I’ve seen, if you have some funds, you might be thinking where to put your money.
Is a checking account the best place to keep your money? Or should you save that money? What’s the difference between the two accounts?
Everyone should have a checking account and a savings account. Both are important for managing money, but they each do different things.
The important thing is to know the differences and unique qualities of each so you can choose the best way to use them.
What’s the difference between a checking account and a savings account? Read on to find out why, based on your financial goals, you should have both.
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Now, let’s get started.
What Is A Chequing Account
A chequing account holds everyday spending money. It handles daily transactions, including depositing checks, paying bills, debiting purchases, moving money online, and ABM withdrawals.
Chequing accounts usually include a debit card and chequebook.
With a chequing account, your money is safe and accessible. With a debit card or ABM, you may withdraw cash quickly.
Unfortunately, chequing accounts pay minimal interest. Thus, long-term funds are best stored elsewhere.
Transactions you can make with your checking account:
- Cheques and cash deposits
- Take out cash from ATMs, bank tellers, etc.
- Single-item purchases (gas, food)
- One-time or pre-authorized payments
- Account transfers inside an institution
- Interac e-Transfer
Different checking accounts have different monthly transaction limits and perks. Thus, you must budget and determine how many transactions you need based on your banking method.
Consider TD Unlimited Chequing for unlimited monthly transactions. No TD ATM fee2 at any Canadian ATM and unlimited transactions.
If you require more or fewer transactions or other perks than the Unlimited Chequing account, TD provides additional chequing accounts with varying features and monthly costs.
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What Is A Savings Account
When you have a savings account, you may put your money in a secure location for a longer period while still collecting interest on it.
By virtue of the greater interest rates that savings accounts provide in comparison to checking accounts, they are an excellent choice for storing your emergency fund as well as your savings for the longer term.
Put the money in the bank, and then sit back and watch it grow.
Unlike a checking account, a savings account is rarely utilized for bill payment or check cashing in contrast to a checking account.
What’s The Difference Between A Chequing Account And A Savings Account
According to my recollection, the existence of savings and checking accounts may be attributed to the controls that were imposed on the banking sector during the Great Depression in order to prevent a “run” on the financial institutions.
A checking account is considered a “demand” account, which implies that you can go to the bank and demand your money, and the bank is required to pay you promptly, either by a withdrawal or a check.
In the past, banks would go out of hand and loan out almost all of the money that they had on deposit.
Naturally, individuals who were in possession of loans would transfer the money that they had borrowed into another checking account, and the bank would then lend that money to another financial institution.
People started believing that they had access to an infinite amount of money, and it continued to grow.
A run on the bank occurs, however, when everyone goes to withdraw that money at the same moment with the intention of doing so.
As a result, the restrictions imposed by the government prescribe a percentage that the bank must have available.
The typical result is five percent. The money multiplier is effectively restricted to 19 times as a result of this.
By imposing restrictions on the amount of money that may be withdrawn and the rate at which it can be done, savings accounts are able to circumvent this constraint.
Due to the fact that the money in a savings account is not subject to such limits, they are able to give you a higher interest rate as the money in the account is worth more to them.
You are required to have a certain minimum balance in certain checking accounts in order to get interest.
Although certain savings accounts permit account holders to make checks, the withdrawal restrictions are still in effect.
There is also something to do with deposit insurance (that is, the government protects checking accounts but not savings accounts). Both types of accounts are protected by deposit insurance.
However, I cannot say that with absolute certainty.
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Chequing Vs. Savings Accounts: How Are They Similar
At a look, these lists show that checking accounts and savings accounts are similar:
- They are both FDIC-insured.
- You can get your money at ATMs and workers.
- You can bank online and on your phone.
Having both a cash and a savings account at the same bank can be helpful if you need to move money between accounts, want to see all of your numbers in one place, or already do business with that bank.
If you have more than one account at the same bank, you can get lower fees, better interest rates, and other benefits.
You can get better interest rates and keep your money out of sight (so you don’t spend too much) if you keep your accounts at different banks.
Once more, checking and savings accounts have some things in common:
1. You can easily find them. Some places that offer checking and savings accounts are credit unions, banks (both online and in real life), and Internet banks.
2. They might not charge a regular fee to keep them up. Many checking and savings accounts don’t charge fees.
There is no regular fee for these accounts, which are also known as no-fee checking or no-fee savings accounts. Other fees may also be very low.
3. They might only need a little money in your account to start. Many banks and credit unions want your business, so it should be easy to find one with minimum balance standards that work for you.
4. They will be okay. In most cases, the Canada Deposit Insurance Corporation will cover up to $100,000 per depositor for each type of ownership in savings and checking accounts held by banks, government-controlled credit unions, and loan and trust companies.
Savings banks and credit unions that are controlled by the province are protected by local deposit insurance plans, like the Credit Union Deposit Guarantee Corporation and the Financial Services Regulatory Authority of Ontario.
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What Are The Pros And cons Of Chequing Accounts
Here are some good and bad things about checking accounts:
Pro: It’s easy to get to with debit cards, ATMs, checks, and mobile banking.
Costs money most of the time.
Also, the money you put in a bank account doesn’t earn interest, and it could be a better way to save because you use it for everything from food to late-night Amazon purchases to your Saturday night bar tab.
That’s why there are better ways to save money for a house payment.
Pros: You can use your debit card to write checks, pay bills, make payments, get cash, send e-transfers, and more.
You only get interest on the money in the account sometimes.
What Are Savings Accounts’ Advantages And Disadvantages
A savings account may provide stability and serenity, which is one of its greatest benefits.
When you put in a savings account, you can make money without taking any risks, which is different from other types of investments like stocks, bonds, and coins. It’s like a stress-free account.
The good and bad things about a savings account are listed below:
Pro: Savings accounts usually have few or no fees. However, read the small print; some banks require you to keep a certain amount of money in the account or put money in it often.
Pro: It gives you interest on your money (rates can change a lot, so check).
Pro: If you have a TFSA, you can get tax-free profits.
Cons: It’s not made for regular draws. A lot of the time, banks will limit how much and how often you can take money.
Getting interest on your savings helps them grow. You can easily get to your money and set up regular payments to save money over time.
Cons: You can only really make a few free payments a month, you can’t use bank cards or write checks, and you might have to pay more to use an ATM.
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Is It Better To Have A Chequing Or Savings Account
It’s best to have both, though. Both accounts are useful for managing money because they are used for different things.
Here are just a few examples:
It is much easier to keep track of your finances when you have a checking account in addition to a savings account.
You can easily divide your money into two streams—savings and spending—and keep an eye on all of your transactions.
Helps keep spending in check: If you only have a checking account, you have a big sum of cash that is ready to be spent.
A savings account keeps you from accidentally spending money that you meant to save for the short or long term.
Eases tax returns: If you want to spend as little money as possible, putting some money away in a checking account with little or no interest could help.
Someone from Scotia can help you find a solution that works for you if you have any questions.
Finally, consider the means of obtaining the funds you require. Please verify that the bank offers the digital banking services you require before opening an account, whether it’s a checking or savings account.
Consider the availability of local banking and the number of ATMs the bank offers, just in case you ever need to use them.
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Final Thought
Now that we have established Savings vs chequing account, You can open the account you want now that you know the difference between a checking account and a savings account.
Which of the two accounts you choose to open relies on your needs and what you want to get from the account.
No rule says you can’t have more than one account. As with any important choice in life, you should weigh the pros and cons of both accounts before deciding which one to use for your banking.
Also, savings accounts and checking accounts are a lot alike, but they are used for different things.
Look for high-APY accounts that will help you earn more money over time before you open a savings or checking account. Be sure to double-check for monthly fees and ways to avoid them.