Your checking account is always active throughout the month, whether it’s the bills you have on auto-pay, the direct deposit coming through your paycheck, or the weekly trips you make to the ATM. But not all if that lines up perfectly throughout the month, sometimes you can encounter unexpected or high than usual expenses!
A checking account is an important necessity for managing your day-to-day money: bills, utilities, gym memberships, and even other financial accounts like credit cards. While anyone will tell you that you should have a checking account, there isn’t any hard rule for how much you should keep in it. But just how much money should you keep in your checking and savings accounts?
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Should you keep all your money in a check account?
Checking accounts exists for transactional purposes, it’s where you keep the money you may need in the near future! But it is an insufficient way to store all your cash for two big reasons:
- Low interest rates
- Even the very best checking accounts pay less interest than online savings or money market accounts. If you want to keep most of your cash where it will earn the most interest, a checking account is not a place for that. You can find the best savings account that pay nearly twice the rate of the best checking account.
- Theft Risk
- The reality is that money you keep in your checking account can be easily accessed via debit card. If you lose your card or your card number is stolen, a thief can wipe out your account by making unauthorized purchases or ATM withdrawals. Keep in mind that debit cards have poor consumer protections against fraud! So if it takes you too long to realize your account has been compromised, you could be fully responsible or any fraudulent charges. On the other hand, many credit card issuers offer zero liability for fraudulent transactions, which means you’re totally off the hook if a scammer makes purchases in your name. So it’s a good idea to use credit cards or cash!
The amount in your checking account should be sufficient to cover the monthly bills, provide you with some ready cash for other expenses, and act as a buffer to avoid potential overdrafts.
The remaining money should be kept safely in savings, because your checking account can quickly become a financial weak spot! So once you’ve built up that one-month balance in your account, it is recommend transferring any extra cash into your emergency fund, savings account, etc.!
BMO Harris Bank Checking: Earn $300 cash bonus when you open a new BMO Harris Smart MoneyTM Account and have a total of at least $4,000 in qualifying direct deposits within the first 90 days. Learn More---BMO Harris Bank Checking Review
Chase Total Checking®: Earn $200 bonus when you open a new Total Checking® account and set up a qualifying direct deposit into this account within 90 days of account opening. Apply Now---Chase Total Checking Review
TD Bank Convenience Checking: Earn $200 bonus with the TD Bank Convenience Checking account when you receive direct deposits of $500 or more within 60 days of opening your account. The account comes with free online banking, free bill pay, and access to 1,300 ATMs. Apply Now---TD Bank Checking Review
What’s the Right Amount in Checking?
Checking accounts aren’t known for carrying high-interest rates. Even banks that offer high-interest checking accounts often provide tiered-interest rate structures that need to be navigated to realized the full value.
One to two months of spending is an arbitrary amount to keep in a checking accounts, it’s enough for most people to go a long time without having to move money between accounts and to avoid an overdraft fee. The amount in your checking account should be sufficient to cover the monthly bills, provide you with some ready cash for other expenses, or act as a buffer*1 to avoid potential overdrafts.
The remaining money should be kept safely in savings because your checking account can quickly become a financial weak spot. If you’re committed to always swiping a debit card instead of a credit card, you should keep the minimally acceptable amount for your spending habits in a checking account.
Buffer*1 is any extra money you have left in your checking account after you’ve paid your bills. Most people who have a checking account buffer keep this money in their account to use for emergencies or unexpected expenses that may pop-up from time to time!
Having a huge cash buffer in your checking account means you’re essentially mixing your checking with money you’re treating like savings! This can lead you to spend easily accessible money that you hadn’t planned to spend in the first place.
How to Protect Your Checking Account
1. Use Your Credit card for the majority of purchases you make! Credit cards have better fraud protection and don’t give the thief direct access to your money.
2. Only try to use ATM’s inside a bank.
3. Cover your hand when punching in the pin associated with your debit card.
4. Set up text alerts for your account balances and transactions
5. Understand your bank’s liability policy associated with a checking account.
BMO Harris Bank Checking: Earn $300 cash bonus when you open a new BMO Harris Smart AdvantageTM and have a total of at least $4,000 in qualifying direct deposits within the first 90 days. Learn More---BMO Harris Bank Checking Review
TD Bank Beyond Checking: Earn $300 bonus when you open a new TD Bank Beyond Checking account and set up direct deposit of at least $2,500. It comes with free online banking, free bill pay, and access to 1,300 ATMs. Apply Now---TD Bank Checking Review
Chase College CheckingSM: Get $100 as a new Chase checking customer when you open a Chase College CheckingSM account and complete 10 qualifying transactions within 60 days of account opening.
Apply Now---Chase College Checking Review
Fifth Third Bank Checking: Get $225 when you open an eligible Fifth Third checking account and make qualifying direct deposits totaling $500 or more within 90 days of account opening.
Apply Now---Fifth Third Bank Checking Review
Bottom Line
You should keep one month’s take home pay as a comfortable spending cushion in your checking account, but move any extra cash into separate savings accounts for any emergency fund, annual expenses, and long-term goals.
For a variety of options, see our list of the Best Bank Promotions and the Best Bank Rates! While you’re here on HMB, you should check out our Bank Guide for any additional questions or resources that might help you with banking!
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