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Can I get a savings account with a debit card?

You can't link a debit card to your savings account - but you can get a chequing account that earns interest.

Canadians are increasingly using debit cards in favour of credit cards when making everyday transactions. Payments Canada reports that in 2018, debit cards were the most widely used payment method by Canadians.

Given how popular debit card are as a means of accessing money, should your debit card be linked to your savings account? Do Canadian banks even offer this option? Since interest is earned on the money you deposit into a savings account, linking it to a debit card may be counterintuitive. If you want to grow your money but need to be able to access it easily, an interest-earning chequing account may be the solution you’re looking for.

Debit cards and savings accounts

A savings account is a crucial banking product for every Canadian. It allows the money sitting in your account to earn interest at an advanced rate, helping you grow a little nest egg without much effort. A debit card is another important item in the wallets of many Canadians. Typically linked to a chequing account, debit cards allow you to withdraw money from ATMs and pay for in-store purchases using the balance in your account.

As a general rule, most banks will not offer debit cards linked only to savings accounts. This is simply because savings accounts are designed to help you save money, while debit cards are designed to help you spend it.

Many savings accounts place limits on the amount of withdrawals you can make in any given month. You could be limited to a maximum of 5 or 10 transactions per month, and in some cases you may not be allowed to withdraw any funds at all without paying a fee. If you break these conditions, you may be charged a fee or you may forfeit your right to earn the maximum interest rate available in any given month.

With this in mind, having a debit card linked to your savings account would likely be counterintuitive. There are some situations where your bank will allow you to access funds in your savings account using a debit card – for example, when your chequing and savings accounts are linked to the same card. For the most part, though, debit cards and savings accounts are kept separate.

The solution: use chequing accounts that pay interest

If you want to combine accessibility of a debit card with the ability to earn interest on the money in your account, you might want to look for a chequing account that earns interest. These are common across general investment accounts and accounts designed to hold funds for retirement.

Most chequing accounts don’t allow you to earn any interest and instead focus on easy access to funds and keeping fees to a minimum. However, there are some accounts available that combine the best features of an everyday chequing account and a savings account (Tangerine’s chequing account, for example). These accounts let you earn a small amount of interest on your balance but also allow you to link the account to your debit card in order to easily access your money to make purchases.

Just like a regular chequing account they provide minimal ongoing fees, easy access to funds whenever you want and the use of a debit card. You can even set up direct debit transfers to schedule automatic payments from your account.

At the same time, you can enjoy the ability to earn interest on your savings balance. While the interest rate is not as high as what you could receive on a high interest savings account, it’s still much better than receiving no interest at all on a standard chequing account.

Traps to avoid with high-interest chequing accounts

High-interest chequing accounts can offer a simple and effective solution if you want easy access to your money but the ability to earn a high rate of interest at the same time. However, there are also a few things you should be wary of before choosing one of these accounts.

The thing to be aware of is that the interest rate you earn on a chequing account will not be as competitive as the rate available on a high-interest online savings account. This means your money will not be working as hard as possible for you while it sits in your account. Additionally, your money may not stay ahead of inflation.

Next, remember that many chequing accounts come with a range of terms and conditions attached, such as a minimum monthly deposit or a limit on the maximum number of transactions you can perform each month. If you fail to meet these conditions, you may either miss out on the maximum available interest rate or have to pay a monthly account-keeping fee.

How do I compare interest-earning accounts?

If you’re looking for an interest-earning account with a debit card, here are some things to consider:

  • Compare the maximum interest rate you can earn on each account. Does this rate apply at all times or are there certain conditions that need to be satisfied each month?
  • Check the fees. Fees are an important factor when determining the value of any bank account, so check for any monthly service fees, annual debit card fees, transaction fees, ATM withdrawal fees and overseas transaction fees that may apply. Also consider whether any ongoing monthly fees can be waived if you meet a special requirement, such as depositing a minimum amount each month.
  • Compare the ways you can access the funds. Can you make ATM withdrawals, online transfers and direct debits? Can you also use the card in a store, and is there any limit on the number of times you can access your account each month?
  • Weigh the benefits of the debit card you get. Visa Debit and Debit Mastercard are accepted at tens of millions of locations around the world, but if you have a preference for either brand, make sure you choose an account with the right type of card attached.
  • How easy is it to use online banking services? More and more everyday banking transactions can be completed online, so check out reviews of each bank’s Internet banking service and mobile banking app. Online banking that’s simple and convenient to use can save you a lot of time and stress.
  • What kind of customer service do they offer? Make sure the account you choose is offered by a bank with a reputation for providing prompt and helpful customer service.

Bottom line

If cash is king, then debit is the new queen, and she’s gaining power. Linking your debit card to an interest-earning chequing account is a flexible alternative to linking your debit card to a savings account. This solution allows easy access to your funds without taking away from the interest earned on your savings.

If you’re saving the money for a major purchase or for retirement, a savings account will offer you a highest interest rate while still giving you limited access in case of an emergency. However, if you want regular access to your money, the lower interest rate on a chequing account might be worth the trade-off for getting rid of maximum monthly withdrawals.

Still trying to figure out which type of bank account is right for you? Check out our detailed bank account guide to learn more.

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