How much money should I keep in my checking account?

When thinking about your bank, you probably think of the one with whom you hold your checking account. You can use a variety of banks for different purposes, such as credit cards and savings accounts, but for most Canadians, chequing accounts are at the center of our banking world.

Your chequing account is the basis of your money. This is the first stop for deposits and the main line of defense against monthly expenses. The health of your chequing account is a litmus test for the health of your general finances. Keep too little money in your chequing account, and you may be hit with penalties and possibly hurt your credit if your account is discovered. Keep it too, and you may miss opportunities to increase your savings.

So, how much money should you keep in your checking account?

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To answer this question, you need to understand where you get value for having a chequing account. Generally, your banking package includes a number of transactions that you can use to conduct your daily banking transactions. Deposits are available and debits – such as point-of-sale (POS) purchases, bill payments and fees – go out. The purpose of a chequing account is to give you the flexibility to move your money quickly and easily, and in exchange, you pay a monthly fee and usually waive any interest on the account. This contrasts with high interest rate savings accounts, which generally do not have a monthly fee and pay competitive interest rates.

Let’s start with the obvious

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You need to keep enough money in your chequing account to cover your current expenses. If you are unsure of your daily needs, the easiest way to do this is to review your monthly statements and see the debits you usually have in a month. For example, if your monthly expenses are $ 1,500 on your mortgage, $ 1,000 on bills, and $ 500 for exit purchases, you will need to have up to $ 3,000 in your account at the beginning of the month to cover your expenses. Since it’s probably not realistic for you to be a month ahead of your expenses, it’s useful to track all the payments on your bill in a calendar so you know when they arrive or use an app to track your payments . Banks do not always move as fast as we wish, so try to have the money in your account at least a few days in advance, just in case.

In addition to this amount, you will want to keep a few extra dollars for unforeseen expenses. If something appears for which you’re not ready (hello the annual subscription fee to the magazine you’ve completely forgotten!), You may end up paying expensive fees (NSF) or overdraft fees $ 50 each time your account is short. Choose a realistic amount to keep your checking account. Like a stamp. Your stamp should be just enough not to worry if you have enough in your account. Start with a few hundred dollars and adjust them according to your needs.

This is the minimum amount you must keep in the bank

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But it is time that you want to keep more. This is because many banks remove the monthly fee for their chequing account checks if you keep a minimum balance. For example, if you open a CIBC chequing account, you may be able to waive the monthly fee by keeping a certain amount in the account at any time. It varies by product, but the CIBC Smart Account has a monthly rate of $ 4.95 that increases as long as you never end a day with a balance of less than $ 3,000.

These minimum balance offers are tempting, but take a moment to determine if this money would be better protected elsewhere. Using the example above, your $ 3,000 would receive interest close to $ 70 if they are registered in an EQ Bank Savings Plus account at an interest rate of 2.3%. You can also search for a free chequing account that does not require you to maintain a minimum balance.