Chequing Account Alternatives

It's likely you already have at least one chequing account in the list of financial products you use. It could be the account your paycheques are deposited into and the account you do some of your daily banking from. However, there's no real need to have more than one account – especially if you're paying a large monthly fee and not seeing any rewards from it. Here is a list of chequing account alternatives that may better suit your financial needs.

 

Savings accounts

If you have multiple chequing accounts with multiple lenders, you may want to simplify down to one for your daily banking, and use savings accounts to deposit large sums of money into instead. Unlike most chequing accounts, savings accounts pay out interest – albeit small - on your deposits, to encourage you to save more money; this is great, if you're trying to save for a large purchase, such as a vacation or a home. There are a number of savings accounts to choose from, including registered accounts, like tax-free savings accounts. Unfortunately, some of them only include a small number of transactions each month, so if you're someone who does a lot of transactions, you may still want to keep your unlimited chequing account on hand.

 

Home equity line of credit

If you're a homeowner, one of the more controversial products to compare against the chequing account is the use of a home equity line of credit (HELOC) or all-in-one account. With both, you can write a cheque up to the credit limit you've been approved for, make withdrawals at ATMs and, sometimes, even get cheques printed for free. There is also typically no monthly fee or extra charges, other than interest on any amount you've borrowed. If you deposit funds into the account, it will be considered a payment and, therefore, will reduce your outstanding balance owed. The one downside to consider is what makes it so controversial: because you'll most likely be approved for a large amount (often tens of thousands of dollars), using a HELOC for your daily banking could tempt you to overspend and go into debt.

 

Prepaid credit cards

If you like to use cash but know that credit cards are necessary at times, you could opt to use a combination of both cash and prepaid credit cards. With a prepaid credit card, you load any amount of money you want, up to the predetermined limit (e.g. you can buy a $100 card, $500 card, etc.) and use it to pay for goods and services. Similar to chequing accounts, prepaid credit cards don't help you build credit, but they can teach you how to use a credit card responsibly and help you make online purchases. Because you can't carry a balance on a prepaid credit card, there are no interest charges involved, but you may have to pay purchasing fees and/or a monthly fee, which may end up being more costly than any chequing account's fees.

 

Cash / envelope budgeting system

Now, if you're someone who spends frivolously with debit/credit cards, it may be worth trying to switch to a cash or envelope budgeting system instead. The idea is that you would cash your paycheques, keep the money at home and potentially divide it into a few envelopes or jars to accommodate all your budgeting needs. For example, you may have a housing envelope (for rent/mortgage, maintenance, utilities, etc.), a food envelope (for groceries and takeout), a transportation envelope (for car payments, insurance, gas, bus passes, etc.) and more. By using cash only, there's no risk you'll go into overdraft, like you could with a chequing account. Once the money runs out, you have to wait until you make more to spend more. Unfortunately, cash is also easier to lose or have stolen, and there's no bank you can report that to for help.

 

Rewards credit cards

Of course, if you're confident in your money management skills, the best chequing account alternative is a rewards credit card. With a rewards credit card, you may or may not have to pay an annual fee, but there are no limits to how many transactions you can perform, they all allow you to earn some type of reward and you have an extra 30 days to pay off your purchases. Once you get into the habit of using your rewards credit card for all purchases, and paying off the balance in full each month, you may be able to get away with having a bank account that comes with a limited number of transactions each month – just enough to have your paycheques deposited into it then pay off the balance of your credit card with!