Top three risks of chequing accounts
1. Low return
- Your money will earn little or no interest in a chequing account
- You won't lose money, but you may make less than if you had put your money in some other, low-risk investments.
2. High costs
- You may be charged high fees for various activities with your chequing account
- Know the fees you are paying, and make sure you have the package of services that is right for you.
3. Bounced cheques
- If you write a cheque and there is not enough money in your account to cover that cheque, it will bounce. That means the person you gave the cheque to will not get paid until you replace the bounced cheque with a good one. This can cause problems for them and it can embarrass you.
- Also, you will be charged NSF fees ($20 or more). It is illegal in Canada to write a cheque when you know you won't have enough money in the account to cover it.
Tip: Ask about overdraft protection for your chequing account. This means that you can arrange to have your cheques honoured up to a certain limit, even if you have not put enough money in to cover them yet. It's like having a short-term loan. You will be charged interest on the overdraft amount. To keep the interest charges down, make sure that you deposit enough to cover the overdraft as soon as you can.
Is my money safe if my financial institution goes out of business?
- Yes, because all major Canadian banks are members of the Canada Deposit Insurance Corporation. Similar insurance is available for deposits at credit unions and caisses populaires
- If you open a savings account with one of these institutions, your money is insured up to a certain limit
- The money must be in Canadian funds. US dollar accounts are not covered.
Remember: Chequing accounts are not designed to give you income
They are designed to make it easy for you to get cash, move your money to another account, or pay bills. If you?re not careful, you may spend a lot on fees each month.
Content in this section is provided in partnership with the Investor Education Fund, a non-profit organization promoting financial literacy to Canadians. To find out more go to GetSmarterAboutMoney.ca.