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How Much Money Should You Keep in Your Checking Account
Your checking account is what you regularly use to pay your bills. The median value of all checking and savings accounts was $5,300 as of 2019, the last available data reported by the Federal Reserve. But if your checking account is your sole banking tool, you may be wondering, “how much money can you have in a checking account?”
While banks don’t set account limits, there are some drawbacks to keeping too much cash in a checking account. Depending on your situation, it may make more sense to stash your money in a savings account or certificate of deposit (CD) instead.
How Much Money Can You Have In a Checking Account?
When you open a new checking account, you typically deposit a certain amount to meet the bank’s account minimums. For example, you can open a Southeast Bank checking account with as little as $50.
Although banks don’t limit how much money you can store in a checking account, there are downsides to keeping too much money in there.
Security
Is it safe to keep money in a checking account? Most banks are members of the Federal Deposit Insurance Corporation (FDIC). Customers of FDIC member banks are protected by FDIC deposit insurance if the bank fails. When you open a bank account, your deposits are insured for up to $250,000.
Lower Yields
Checking accounts usually have much lower annual percentage yields (APYs)* than savings accounts, and some earn no interest at all. There are exceptions — Southeast Bank’s Bonus Rewards Checking1 allows you to earn up to 2.01% APY on balances up to $20,000 if you meet the account’s requirements — but you can usually earn a higher APY with other banking options.
How to Decide How Much to Keep in Checking
When deciding how much money to keep in your checking account, consider the following factors:
- Account Minimums: What is the minimum balance for a checking account? Account minimums can vary by bank, but you generally need at least $50 to open an account.
- Fees: Some banks charge monthly maintenance or service fees unless you maintain a certain daily average balance, such as $1,200. Review your bank documents to see how much money you have to keep in your checking account to avoid unnecessary fees.
- Routine Spending: Review your bank statements from the past three months and calculate how much you spend on routine or recurring expenses. Your average spending amount for a month is the minimum you should keep in your checking account to ensure you have enough cash to cover your bills.
- Financial Cushion: It’s good to keep a little more — such as a few hundred dollars — in your checking account than you think you need. Banks collected $15.47 billion in overdraft and insufficient fund fees in 2019, so keeping a financial cushion in your checking account can prevent you from accruing those fees due to unexpected expenses.
3 Alternative Places to Store Your Money
Once you’ve calculated how much money to keep in your checking account, you may be unsure how to use your other cash. Your money can earn higher returns with the following alternatives:
1. Savings Accounts
A checking account is what you use to pay for your regular expenses. By contrast, a savings account is what you use to save for other goals. You can use a savings account to build an emergency fund, tuck away money for a down payment on a house, or plan for a dream vacation.
Savings accounts usually earn higher APY than checking accounts. For example:
- Bonus Rate Savings2: Earn up to 2.01% APY on balances up to $10,000 by enrolling in eStatements and posting and settling at least 15 round up debit card transactions from a personal Southeast Bank checking account.
- Milestone Savings3: Available to children 17 and under, the account has no service fee, and it requires just $5 to open. Account holders will earn 0.15% APY on their accounts.
- Money Market Savings4: The Money Market Savings Account has a minimum balance of $2,500, but account holders can earn APYs ranging from 0.05% to 0.20%, depending on their account balance.
Visit Southeast Bank or a local branch to open an account.
2. CDs
CDs can be an excellent tool for storing your money and earning a higher yield. CDs hold your money for a fixed period of time, such as six to 24 months. In exchange, the bank pays you interest, often at a higher APY than you’d get with a checking or savings account. However, the money cannot be touched until the CD’s maturity date, or you’ll incur early withdrawal penalties.
At Southeast Bank, there are multiple CDs to consider. Right now, there is a 24-month CD special5 offering 0.89% APY with a minimum account balance of $1,000.
3. Individual Retirement Accounts (IRAs)
If you want to save for your future, stashing your money in an IRA can be an excellent idea. Depending on the IRA type and whether you have a retirement plan through an employer, your contributions may be tax-deductible. And, you can invest those contributions in the stock market to potentially grow your money.
Opening a Checking Account Account
How much money can you have in a checking account? Now that you know that banks don’t set maximum account limits, you can come up with a plan to handle your money. You can keep some cash in a checking account, but you may decide your money can do more in a savings account, CD, or IRA.
To discuss your options or to open a new account, visit a Southeast Bank branch near you.
*APY=Annual Percentage Yield
1Each statement cycle, the account must be enrolled into eStatements and post and settle at least 15 qualifying debit card transactions (point of sale or online purchases) of $1 or more to earn the bonus rate of 2.01% APY for balances up to $20,000 (.20% APY on balances over $20,000). Otherwise, the account will earn .05% APY.
Some fees, which may reduce earnings, and restrictions apply. $3.00 Paper Statement fee is waived with a daily average account balance of $1,200 or a daily average relationship balance of $10,000. Unlimited check writing is subject to available funds. Rates are accurate as of 4-4-2022 and are variable and subject to change after account opening. Limited to one account per primary owner tax ID.
2Each statement cycle, the account must be enrolled into eStatements and post and settle at least 15 round up debit card transactions from a personal SouthEast Bank checking account with the Round Up feature to earn the bonus rate of 2.01% APY for balances up to $10,000 (.20% APY on balances over $10,000). Otherwise, the account will earn .05% APY. Unlimited withdrawals at teller window or ATM. 6 pre-authorized withdrawals per month, includes checks, ACH debits and online banking transfers are allowed: $3 fee for each thereafter. Fees may reduce earnings. Limit one Bonus Rate Savings account per primary owner tax ID. Rates are accurate as of 4-4-2022 . Rates are variable and subject to change after account opening.
3 $5 minimum to open. A joint owner that is at least 18 years of age is required.
6 pre-authorized withdrawals per month at no charge, including checks, ACH debits and online banking transfers; $3 each thereafter; unlimited withdrawals at the teller window or at the ATM. This is a variable rate account and the rate is subject to change after account opening. The primary account holder must be under the age of 18. A joint owner that is at least 18 years of age is required. This account will be converted to a Consumer Statement Savings upon the primary account holder reaching the age of 18. Interest is calculated based on the account's total daily balance and is credited quarterly.
4$2,500 minimum to open. This is a variable rate tiered account. No minimum balance required. 6 pre-authorized withdrawals per month at no charge, including checks, ACH debits and online banking transfers; $6 each thereafter; unlimited withdrawals at the teller window or at the ATM. Interest is calculated based on the account's total daily balance and is credited quarterly.
5The interest rate for the 24-month CD Special is 0.89% with a corresponding APY of 0.89%. The APY assumes interest remains on deposit until maturity. Penalty for early withdrawal. Promotional CDs are NOT eligible for interest checks. Any withdrawal of principal or interest during the term of the account will reduce earnings. Interest for the account will be compounded and credited quarterly. Interest begins to accrue on the business day of deposit of any noncash item (for example, checks). Minimum opening balance $1,000. Fees may reduce earnings. Rates are subject to change. Limited time offer. Rates effective 4-4-2022 .
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Information contained in this blog is for educational and informational purposes only. Nothing contained in this blog should be construed as legal or tax advice. An attorney or tax advisor should be consulted for advice on specific issues