Bank Accounts: Chequing, Savings, and GICs

Why Your Bank Account Choice Matters

The type of bank account you use affects how much you pay in fees, how much interest you earn, and how easily you can access your money. Many Canadians open whatever account a bank advisor suggests and never reconsider it, losing hundreds of dollars per year to unnecessary fees or missed interest.

Choosing the right accounts — and using them strategically — is one of the simplest ways to improve your financial life. You do not need to be an expert; you just need to understand what each type of account does and when to use it.

Chequing Accounts: Your Financial Hub

A chequing account is your day-to-day financial headquarters. Your paycheck goes in, your bills go out, and your debit card and e-Transfers draw from it. Almost every financial activity you perform connects to your chequing account.

Types of Chequing Accounts

Basic or no-frills accounts. Federal regulations require all Canadian banks to offer basic accounts with a low monthly fee (around $4) that include a minimum number of transactions. These are designed for Canadians who need affordable access to banking.

Standard chequing. The most common type, typically $4 to $17 per month. Includes a set number of transactions (12-25), a debit card, and online banking. Extra transactions incur fees of $0.50 to $1.50 each.

Premium or unlimited chequing. Costs $15 to $30 per month but includes unlimited transactions, often with extras like free cheques, a safety deposit box discount, or credit card annual fee waivers. The monthly fee is usually waived if you maintain a minimum balance of $3,000 to $5,000.

No-fee chequing. Digital banks like Tangerine and Simplii Financial (owned by Scotiabank and CIBC respectively) offer chequing accounts with no monthly fee, unlimited transactions, and no minimum balance. The trade-off is no physical branches, though you can use parent bank ATMs.

Choosing a Chequing Account

For most Canadians, the decision comes down to a simple question: do you need physical branch access?

If yes, choose a Big Five bank account and maintain the minimum balance to waive the monthly fee. If you cannot maintain the minimum balance, the fee is effectively a cost of branch access — calculate whether you actually use branches enough to justify $15 to $30 per month ($180 to $360 per year).

If no, a no-fee digital chequing account at Tangerine, Simplii, or a similar institution saves you hundreds per year. These accounts offer the same Interac debit, e-Transfer, and bill payment capabilities as any Big Five account.

Savings Accounts: Where Your Money Grows

A savings account is designed for money you want to keep safe while earning some interest. Unlike chequing accounts, savings accounts prioritize growing your balance over facilitating transactions.

Types of Savings Accounts

Basic savings at Big Five banks. These accounts earn almost nothing — often 0.01% to 0.05% interest. On a $10,000 balance, that is $1 to $5 per year. They exist primarily as a holding place for money you want separated from your chequing account, not as a tool for meaningful growth.

High-Interest Savings Accounts (HISAs). Online banks and some credit unions offer dramatically better rates — typically 2% to 4% or more. EQ Bank, Tangerine, Motive Financial, and Oaken Financial are well-known options. On a $10,000 balance at 3%, you earn $300 per year — sixty times more than the Big Five’s basic rate.

Promotional rate accounts. Some banks (especially Tangerine) offer promotional rates of 5% or more for new deposits, reverting to a standard rate after a few months. These can be worth using strategically, but always know what rate you will receive after the promotion ends.

Interest Calculation

Most Canadian savings accounts calculate interest daily and pay it monthly. This means your interest compounds — you earn interest on your interest. The rate advertised is typically the annual rate, so a 3% account earns approximately 0.25% per month on your balance.

Interest earned in a regular (non-registered) savings account is fully taxable as income. This is one reason tax-sheltered accounts like the TFSA are so valuable — the same interest earned inside a TFSA is completely tax-free.

Savings Account Transaction Limits

Some savings accounts charge fees for withdrawals or limit the number of free transactions per month. This is by design — savings accounts are meant for saving, not spending. Always check the withdrawal rules before choosing an account.

GICs: Guaranteed Returns for a Fixed Term

A Guaranteed Investment Certificate (GIC) is a deposit where you agree to lock your money with a bank or trust company for a fixed period — from 30 days to five years — in exchange for a guaranteed interest rate. GICs are one of the safest places to put money in Canada.

How GICs Work

When you buy a GIC, you are essentially lending the bank your money for the agreed term. In return, the bank guarantees to pay you back your principal plus a fixed interest rate. GIC rates are typically higher than savings account rates because you are giving up liquidity.

For example, a 1-year GIC might pay 4%, while a savings account at the same institution pays 2.5%. The trade-off is clear: higher return in exchange for not being able to access your money for a year.

Types of GICs

Non-redeemable (locked-in). The most common type. You cannot withdraw before maturity without a penalty (often forfeiting all or most of the interest). These offer the highest rates.

Redeemable (cashable). You can withdraw before maturity, usually after a minimum holding period of 30-90 days. Rates are lower than non-redeemable GICs but higher than savings accounts.

Market-linked GICs. Your return is tied to the performance of a stock market index. Your principal is guaranteed, but your return can range from 0% to a capped maximum. These are more complex and often have lower expected returns than fixed-rate GICs once you factor in the cap.

GIC Laddering Strategy

Rather than locking all your money in a single 5-year GIC, you can create a GIC ladder. Divide your money into five equal portions and invest each in a 1-year, 2-year, 3-year, 4-year, and 5-year GIC. Each year, one GIC matures, giving you access to a portion of your money. You can then reinvest it in a new 5-year GIC, capturing the typically higher rates for longer terms while maintaining partial annual liquidity.

GIC laddering is particularly effective for emergency fund strategy — you keep some money fully accessible and earn better rates on the portion you are less likely to need immediately.

CDIC Protection for GICs

GICs with terms of five years or less at CDIC member institutions are fully insured up to $100,000 per category. GICs with terms longer than five years are NOT insured by CDIC. Always verify the term and the institution’s CDIC membership before purchasing.

Registered vs. Non-Registered Accounts

An important distinction in Canadian banking is between registered and non-registered accounts. This applies to both savings accounts and GICs:

Non-registered accounts. These are standard accounts with no special tax treatment. Interest, dividends, and capital gains are taxed in the year they are earned.

Registered accounts. These are accounts registered with the federal government that offer tax advantages. The main types are:

• TFSA (Tax-Free Savings Account): Contributions are made with after-tax dollars, but all growth and withdrawals are completely tax-free.
• RRSP (Registered Retirement Savings Plan): Contributions are tax-deductible, growth is tax-deferred, but withdrawals are taxed as income.
• FHSA (First Home Savings Account): Contributions are tax-deductible AND withdrawals for a qualifying home purchase are tax-free.

You can hold savings accounts and GICs inside any of these registered accounts. A TFSA savings account at EQ Bank earning 3% is dramatically more valuable than a regular savings account earning 3%, because you keep every penny of the interest. You will explore these registered accounts in depth in later modules on savings options and investment options.

Building Your Account Structure

A practical account structure for most Canadians looks like this:

One chequing account for daily transactions. Choose no-fee if possible. Your paycheck arrives here, and bills are paid from here.

One high-interest savings account for your emergency fund and short-term savings goals. Choose the highest-rate HISA you can find at a CDIC member institution.

One TFSA for tax-free savings and investing. Max this out before using non-registered accounts.

GICs as appropriate for money you will not need for a known period — a house down payment in two years, for example.

You do not need all your accounts at the same bank. In fact, holding your savings at a different institution than your chequing can help reduce the temptation to dip into savings. Many Canadians use a Big Five bank for chequing (branch access) and an online bank for savings (better rates). Managing multiple accounts becomes easier with tools designed for this purpose.

Key Takeaways

• Chequing accounts are for daily transactions; choose no-fee digital options if you do not need branch access to save $180-$360 per year.
• High-interest savings accounts at online banks pay 50 to 100 times more interest than Big Five basic savings accounts.
• GICs offer guaranteed returns in exchange for locking your money; use laddering to balance returns with accessibility.
• CDIC insures eligible deposits (including GICs up to 5 years) at member institutions to $100,000 per category.
• Holding savings and GICs inside registered accounts (TFSA, RRSP, FHSA) provides significant tax advantages.
• A well-structured account setup combines no-fee chequing, high-interest savings, and tax-sheltered registered accounts.

In the next lesson, you will explore the neobank revolution — digital-only banks like EQ Bank, Tangerine, Wealthsimple Cash, Neo, and KOHO that are reshaping Canadian banking.