I have been getting a lot of "tips" from my bank lately about different ways to save. Things like "Save $1 week 1, $2 week 2", etc or "tax my spending habits".

Whenever I see things like this, they are always tied to moving money from your checking to your savings account.

The issue is, I almost never have any money in my checking account. All of my spending goes on my credit card, and any time I get paid I automatically move all my money to my savings account as it has a higher interest rate than my checking account.

Is there any benefit to storing money in your checking account, when with my bank I can move money between accounts, free of charge anytime I wish?

Location is Canada.

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    Can you add a location? with my bank you can move money between accounts, free of charge anytime you wish? may not actually be true in all cases (i.e. in the US you are limited to the number of transactions you can make from a savings account, because of Reg D). – dwizum Nov 25 '19 at 14:50
  • @dwizum Added location, was curious if maybe that was the case but since the tips are coming from my bank (which is well known for having no fees) I wasn't sure if that would change based on location. – DjangoBlockchain Nov 25 '19 at 14:56
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    I had answered based on a US location prior to seeing your location. I don't know Canadian banking very well, but I would assume the answer is largely similar so I will leave it. I don't know if there is actually a Reg D equivalent in Canada, but most reserve banking systems do have some degree of regulation on savings accounts. – dwizum Nov 25 '19 at 14:58
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    Things like "Save $1 week 1, $2 week 2", by any chance are you supposed to save $4 on week 3? Because if so, I'm pretty sure that following this strategy to its conclusion will actually result in you saving over a million dollars in under 20 weeks... – Michael Nov 26 '19 at 22:54
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    @Michael I believe its just going up linearly, 3$ week 3, 4$ week 4. – DjangoBlockchain Nov 27 '19 at 15:23

You said,

Whenever I see things like this, they are always tied to moving money from your checking to your savings account.

The reason why that's the mechanism they're suggesting is because most people treat their checking account as their primary transaction account - they leave their paycheck there, and spend out of it for daily purchases, bills, and so on. Perhaps also transferring a small portion to a savings account or other savings instrument. Most people tend to live on their debit card, or their credit cards (which they pay via their checking account), or on cash (which they withdraw from their checking account).

You seem to behave a little differently, which is okay, but to answer your direct question,

Is there any benefit to keeping money in a checking account?

The benefit is allowing yourself to separate a transactional account from a savings account. People generally like this separation because it allows them to explicitly separate money meant for longer-term savings from money they're intending to spend immediately.

In the US, the separation of a savings account from a transactional account is essentially regulated by Reg D which dictates that consumers are limited in the number of transactions they can make out of a so-called savings account. The purpose of this limit is to essentially force consumers to separate savings and transactional accounts. The fed wants this separation because it requires banks to reserve differently on savings and checking accounts, and if consumers ignore the different intended purposes for these products, it makes that reserve process much harder to implement.

If you've found something that works for you, then there's no need to change. Just make sure you understand if there are any limits on your savings account.

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    Makes sense! I guess with my spending habits my "transactional" account is my credit card, so if these things would say, allow me to move money from my credit card to my savings, instead of checking to savings, it would be very worthwhile. – DjangoBlockchain Nov 26 '19 at 13:01
  • Ultimately the bank is probably very happy to have a consumer like you using a credit card as a primary transactional account, since they're making interchange off every swipe and since I'm assuming you're paying it off every cycle, there's little lending risk for them. – dwizum Nov 26 '19 at 13:59
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    Also, I did a quick google search, and it seems like the Canadian banking systems aren't directly equivalent to the US systems in terms of Reg D and reserve requirements, so this answer isn't 100% accurate for your situation - although at the end of the day, it looks like consumer behaviors are essentially the same and so from a consumer perspective it's still probably legitimate. It would be interesting to hear an answer from someone familiar with regulation around account types in Canada. – dwizum Nov 26 '19 at 14:00

Depends on the saving account. A good account yieds 2% and makes a savings account worth having.

In this situation your strategy makes since. Earn some dollers before paying off the credit card each month. As long as your credit card charges don't exceed your long term saving goals.

I use checking to avoid Reg D's 6 monthly transactions and rarely when I need to write a check.

  • My bank is pretty awesome, there are no fee's and I get good cash back on the credit card. I think I actually earn more money using my credit card than if I used my savings account! – DjangoBlockchain Nov 27 '19 at 15:32

Yes, most bank plans have a required minimum amount to avoid monthly fees. It's about $3000 (minimum balance in a month) to avoid about $10 in monthly fees, or ($5000 for $25, $1500 for $5 etc.. depending on your account). This works out to $120 / $3000 or 4% annual interest, ie. more than your savings account. So always keep at least the minimum balance to avoid fees.

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    Interesting! Since my bank does not have these types of minimums/fees (I could transfer money between checking/saving back and fourth all I want) I guess the same incentive is not there. – DjangoBlockchain Nov 26 '19 at 17:46

In my country (the United States) they advise to bank on a community bank, because they treat you as family, rather than big banks that see you only as a number ($). A checking account is for convenience - you can pay by using debit card or by check. I stopped using credit cards; we follow what the bible said: "a borrower is a slave to the lender". For savings, look for a high interest rate.

  • Thanks for the answer! I feel like credit cards don't really fail under this, using a credit card is a great way to save money, and get rewards (cash back) while also gaining good credit scores. Appreciate your insight though :) – DjangoBlockchain Nov 27 '19 at 15:30

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