Using Your Line of Credit as Your Chequing Account

There are three certainties in life. Death, taxes, and bank fees. Luckily having a line of credit can help reduce the last one.

Initially, banks started off not charging their customers for having deposit accounts because they can use the deposits as capital for investment. Somehow things took a wrong turn for the customers and now everyone must pay a fee in order to access their own money while bank profits soar. These fees range anywhere from $4 to $25 a month and that does not even include extra fees like over activity, cheques, and overdraft protection.

Bank fees are a huge and dependable cash cow for the banks and they would probably kill me for putting this out there but I will anyways. I am going to explain the benefits of using your line of credit as your main chequing account. And the benefits are huge.

First, there are no monthly fees on your a line credit. Because it is a credit account, banks want to encourage their customers to have and use them so there are no monthly fees to have this account. Not paying for monthly fees on a chequing account can help you save anywhere from $50 to a couple of hundred dollars a year. It adds up.

Another way banks encourage you to use your line of credit is by offering cheques free of charge. Ordering cheques on a chequing account could cost anywhere from $8 to $40. With a line of credit you get them free and unlimited.

Thirdly, lines of credit allow pre-authorized debits and credits just like chequing accounts. That means you can give a void cheque to an employer for direct deposits and to creditors and billing companies to directly debit from your LOC just like you would with your regular chequing account. Other than having a positive balance, I don't believe there is anything a chequing account could do that you can't do with a line of credit.

The final (and for myself the most important) advantage is that you can have unlimited transactions free of charge on your line of credit. This is especially useful since most banks allow you to attach your line of credit account to your debit card just like a chequing account. This means you can use your line of credit any place that accepts debit cards. No cash but you want to buy that $1 bag of chips? No problem. Finish that bag in 2 minutes and want to buy another? No problem. Pay all your bills online for free. No extra costs and also not be bounded by the number of transactions.

Now I am not trying to encouraging people to use or apply for a line of credit so they can go into debt. I'm just trying to help those that are already in debt to take advantage of an opportunity that will help them save money. This is what this site is about. Making that switch to use it as your main chequing account will save you more money than you realize in the long term.

No monthly fees, unlimited transactions, AND cheques all for free. You can't find a better deal than that. Now if only we could figure out something like this for the cellular carriers.

Update: It has been brought to my attention that I did not state that there are no deposit holds on a line of credit like there is on some chequing accounts.

This is true. This is another advantage which I forgot to mention. If you max out on your line of credit and deposit a cheque, there are no holds so you can have access to the newly deposited amount immediately. This may not be true for some chequing accounts which could hold your deposit for up to a week. The reason for this is because the bank has already granted you a credit facility (with your loc) but none was granted for your chequing account. They are separate. Yet another good reason to use the line of credit as the main chequing account.

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Dated: Sunday, January 24, 2010


  1. Anonymous says:

    That's a very good tip. Now I'm gonna close my chequing account at rbc and just use my line of credit at TD. Thanks!

  2. Katherine says:

    Great article, thank you! I have read on some internet forums about some individuals receiving letters basically saying they should not keep their lines of credit in the black (not sure if thats considered a credit or debit balance in a line of credit??) or they will have their LOC revoked. No clue if the banks would actually follow through, but curious if you've heard similar stories for those of us who like to keep at least some cash in our LOC's all the time so we don't have to pay interest.

  3. I actually wrote this information for people that are already using their line of credit. Personally I think people who have positive balances are abusing the system. That's not what it's for. If you want to save money that badly but can't keep a minimum balance then open a free account at PC Financial or Coast Capital. But if you owe money on it already then you might as well take advantage of the free transactions.

  4. Laxmi says:

    Abusing the system? Hardly. I worked at a bank for 23 years and frankly, the bank more often than not is the one doing the abusing if that is what you want to call it. Generally people who use their LOC as a chequing account either pay little or no interest, and get free cheques and a free overdraft. It's not abusing anything. Anyone who uses their LOC as savings is an idiot.