Most chequing accounts are designed to separate your more fluid cash from long-term savings. Although rarely offered, an interest-earning chequing account (also known as a hybrid account) sweetens your money management with a rate that allows you to earn interest along with that easy access.
These hybrid accounts combine the accessibility of a debit card with the ability to earn interest on the money in your account, and are common across general investment accounts and accounts designed to hold funds for retirement.
Our interest-earning chequing account guide below allows you to compare these accounts that 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.
Do chequing accounts earn interest?
While some chequing accounts earn interest, many do not. Chequing accounts from big banks, like TD and RBC, don’t typically offer the option to earn interest on your account balance. However, most digital banks, like Tangerine and EQ Bank, do offer interest-earning chequing accounts.
That said, the interest rate you earn on your chequing account will always be less than what you could earn with a savings account. So if you’re looking to use interest to grow your money, you’re better off opting for a high-interest savings account. But if you just want to top up the money set aside for everyday spending, an interest-earning chequing account can be a great option.
Compare interest-earning chequing accounts
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How does an interest-earning chequing account work?
An interest-earning chequing account allows you to earn interest on your chequing account balance while still allowing you to regularly access your funds, use ATMs, pay bills and do everything you would normally do with a regular chequing account. But the interest rate is typically at a lower rate than you’ll find with a savings account. Because the rate is lower, it won’t replace traditional or high-yield savings, but a little growth each month can’t hurt.
Interest-earning chequing accounts aren’t usually offered by the major banks but they do exist. Read the fine print of your account’s terms and conditions for minimum deposits or balances required to trigger the interest rate.
How can I compare interest-earning chequing accounts?
First assess what your needs are, the type of transactions you tend to make and how often you deposit money in your account. High-yield chequing accounts often come with low ongoing fees. To make sure you’re getting the best deal you’re eligible for, weigh the interest rate against ATM, debit and other transaction fees that can eat into your ability to earn interest.
Competitive features designed to keep more of your money away from fees and reward you for your loyalty include:
No monthly fees. Look for ways to avoid advertised maintenance fees, including committing to regular direct deposits or autopay requirements.
Low or no monthly deposits. Some accounts require a minimum monthly deposit to earn interest or avoid fees.
No ATM fees. Competitive banks offer free out-of-network withdrawals and even reimburse you for fees you’re charged by third-party operators.
Convenient banking. If you like banking on the go, look for a robust banking app that allows you to manage your balance from your phone and an easy to use online banking portal. Find a network of brick-and-mortar branches if you prefer in-person support.
Low minimum opening balance. Look beyond banks requiring minimums that are more than you have to save.
Competitive interest rates. Get the most out of your interest rate by learning whether interest payouts align with your paycheques — you’ll want it calculated against your highest balance between constant withdrawals and deposits.
Rewards and perks. Many banks entice customers with cash back, miles or other rewards with your debit card.
No foreign transaction fees. Frequent travellers will appreciate straightforward spending overseas and on foreign websites.
Can I pay bills from my savings account?
Generally, no — though you may occasionally see exceptions. Paying bills from your savings account would be detrimental to your savings goals, so most banks don’t allow you to write cheques, use a debit card or pay bills from your savings account.
If you want to withdraw any money from your account, you usually have to transfer the funds to a linked chequing account. Once the money arrives in the linked account, it can then be used to pay your rent and other bills.
You may, however, be able to pay a bill from your savings account using a third party payment platform such as PayPal. This option will result in higher fees, as you’ll be charged either a flat rate or a percentage of your transaction as payment for using the third party’s services. Another option is to have funds debited directly from your account to your bill payee.
What is a direct debit?
When you set up a direct debit from your bank account, you give a third-party service provider permission to withdraw money from your account. But it’s not a good idea to use these often, as they increase your chance of going over your account’s withdrawal limit and being charged fees.
What are the pros and cons of interest-earning chequing accounts?
Pros
Interest on your balance. Earning money with little effort is a plus, especially when most chequing accounts don’t offer it.
Easy access to your money. Set aside the funds you need to pay regular bills and funnel anything that’s left to your long-term savings account.
CDIC protection. Your balance of up to $100,000 is protected against the financial institution’s collapse or failure.
Cons
Low interest rates. Interest rates are often lower than your typical savings options, so don’t expect to rely on these accounts for long-term savings.
Minimums required. Some banks may require you to maintain a minimum balance in the account. If you can’t maintain at least the minimum, you may end up paying an assortment of fees, or find you’re excluded from earning the interest you sign up for.
Bottom line
An interest-earning chequing account can earn you a little extra on your balance intended for regular, everyday payments. But it doesn’t replace a savings account for long-term savings.
To keep your nest egg safe, compare savings accounts to find the highest interest rate you’re eligible for.
Interest-earning chequing account FAQs
Yes, you can with most banks. Click on the table above to visit the bank's website and follow the steps to apply.
No. Generally, a savings account will offer stronger interest rates than interest-earning chequing accounts on your balance.
These will vary with each bank, but usually you must provide legal and personal information and possibly meet the minimum opening balance criteria to open an account, among other requirements.
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. So while most traditional banks won't allow you to link a savings account to a debit card, interest-earning chequing accounts can give you access to money as it grows.
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. Compare hybrid chequing accounts that earn interest.
Yes, most banks will let you open both a chequing and savings account. Many will also let you link the 2 accounts so that you can easily transfer money between them.
Many banks may choose to impose a transaction limit on the number of times you can transfer out of your savings account. However, some banks such as Tangerine allow such transfers for free. You'll have to check with your bank to find out exactly what policies apply to your account.
It depends. Banks have different definitions of what counts as a transaction. Check the terms and conditions for any savings accounts you're considering to see whether your bank counts an ATM withdrawal against your transaction limit.
Dawn Daniels is a freelance content strategist and SEO manager and former editor at Finder, specializing in investments and lending. Dawn has edited more than 50 published books, including personal finance titles that have become best sellers on the Amazon Top 100. She holds a BA in English language and literature from Cornell College.
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