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Your options to pay bills from a savings account

Most savings accounts can't be used to pay bills — but there are exceptions.

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Interest-earning chequing accounts let you earn interest on your money while giving you access to ATMs, debit cards and online banking. But you might have to meet strict eligibility requirements or settle for a lower interest rate to qualify.

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.

Savings account withdrawal limits

Savings accounts aren’t meant to function like chequing accounts, and most banks limit the number of times you can withdraw from your savings account without being charged a fee. If you go over this limit, your bank can charge you a certain amount per transaction (usually between $1 and $5) – if you’re not careful, these fees can really add up.

Banks have different policies on what counts as a transaction, so some types of account activity may be allowed without any fee (for example, transfers to/from a linked chequing account or bank fees that are automatically withdrawn from your savings account each month).

Check the terms and conditions of your savings account to find out what your bank considers a transaction.

Is a high-interest savings account right for me?

It depends on how you want to use your account. If you want to take advantage of the maximum interest rate offered by a high-interest savings account, you’ll need to be willing to accept limitations on how you can access your money. You’ll be able to make a limited number of withdrawals, and it might not be possible to pay bills directly from your savings account.

If you want to earn interest while regularly moving money into and out of your account, you may be better off with a money-market fund or an interest-earning chequing account.

Money market funds

Money market funds allow you to invest in low-risk, short-term investments like Government of Canada Treasury Bills (T-Bills), Provincial Treasury Bills and Commercial Papers (corporate promissory notes). These investments will generally give you a higher rate of return than a typical savings account, but you won’t earn that interest unless you keep the funds locked into the investment until its maturity date. Maturity dates are usually between 1 and 12 months from the start of the investment.

Money market funds are often highly liquid – meaning that you can withdraw your funds at any time and receive a deposit into your account in as little as 1 or 2 days (note, though, that withdrawing your funds before the end of the investment period will forfeit any interest you earned on the money).

The only potential drawback is that you may need to meet a higher minimum balance requirement to be eligible for a money market account.

Interest-earning chequing accounts

Conventional chequing accounts don’t allow you to earn any interest on your balance. Instead, their main focus is on making it as easy as possible to manage your day-to-day spending through ATM withdrawals, direct debits and online transfers.

However, some banks also offer interest-earning transaction accounts. These accounts offer many of the same features as an ordinary chequing account, including the ability to pay bills directly from your account, but they also allow you to earn interest on your balance. They also typically charge minimal or no ongoing fees.

But these accounts don’t come with interest rates as high as those on regular savings accounts, and they may also place limitations on how many transactions you can make each month without paying a fee.

Interest-earning chequing accounts

Comparing interest-earning chequing accounts

When looking for a new account, compare:

  • The interest rate. Even a small variation in the interest rate can make a big difference over time.
  • Account terms and conditions. Read the fine print to make sure you’re aware of any restrictions or conditions that apply to your account. For example, is there a limit on the number of withdrawals you can make? Do you need to deposit a minimum amount each month to avoid fees?
  • Fees. Check what fees you might be charged, including ongoing monthly or yearly fees, overdraft fees and penalty fees for making too many transactions.
  • Account access. Check what options you have for accessing your money, including online, debit card, ATM, cheque book and local branch access.
  • Online banking portal. Read reviews of the bank’s Internet banking portal and mobile banking app — if you bank online, a user-friendly app can make a big difference.
  • Customer service. Investigate the bank’s reputation for providing prompt and helpful customer service. Is support available online, over the phone and via email if you ever need help?

Tips for setting up automatic bill payments

If you’re setting up direct debit with a company:

  • Do your research. Before giving a company your bank account information, make sure it’s trustworthy.
  • Check your balance. If you don’t have enough in your account for the payment, you could be on the hook for penalty fees.
  • Check your statements. Setting up a direct debit means that you’ll run the risk of being incorrectly charged for something. Check your monthly bank statements to make sure you’re not getting ripped off.

Bottom line

Most traditional savings accounts won’t let you pay bills online or by cheque, but many interest-earning chequing accounts will. However, you may have to settle for a lower interest rate or meet stricter eligibility criteria to open an account.

Compare your savings account options before deciding which type of account is right for you.

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