How Much Should You Keep In Your Checking Account?

September 26, 2019

Many checking accounts are free and are great for everyday spending, automatic bill payments, and ATM withdrawals. Having a checking account gives you access to liquid funds and an easy way to manage your cash flow.

Let's assume you have enough in your checking account to avoid monthly fees and you have a good feel of your monthly budget, but you probably don't want to stash all your funds in your checking account where it is very easily accessed by your debit card. But what is the "correct" amount to keep in your checking and when do you start transferring funds to a savings or retirement account? There is no easy answer, but here are a few items you should consider.

Minimum Balance

Many checking accounts require a minimum balance or charge you a monthly fee. Be sure to check what that balance requirement is and be sure to stay above that amount. No need to pay unnecessary fees because you transferred too much to your savings.

Avoid Overdrafts

On that same note, keep enough in your account to stay above $0. When you spend more than is available in your account you overdraft, and there is usually a hefty fee per overdraft/ Set yourself a mental minimum like $100 or $500 and start thinking of that amount as your zero. Set up an account notification so you get a text every time your account gets low.

Know Thyself

Are you someone who is going to empty your account between paydays no matter how much is in there? Or are you a super saver who pinches every penny? Either way, be honest with yourself and understand how you spend money. If you have a hard time saving for later and love spending now, try setting up auto transfers to put some of those funds into a savings account on payday. Out of sight out of mind, right? Even a small amount like $25 or $50 every few weeks will add up over time.  

Max Out Interest

If you tend to be a saver, and are not tempted to spend a larger amount of funds in your checking account, a high-interest account is probably for you. High-interest accounts like FSB Loyalty Checking, earn more interest when you use your account, up to a specific dollar amount. You should try to keep the maximum amount needed to earn the highest level of interest. Anything over that amount will earn a lower rate of interest, so unless you need those funds to cover monthly expenses it is best to stow that overage in a savings account.

Checking accounts are a great way to manage liquid funds for every day expenses. There may not be a magical number to keep in the account, but knowing your monthly budget and keeping enough to cover your expenses is a great start. Remember to avoid any fees whenever possible and take time to reassess your budget regularly.

This blog is intended to be an informational resource for readers. The views expressed on this blog are those of the bloggers, and not necessarily those of FSB. This blog does not provide legal, financial, accounting or tax advice. The content on this blog is "as is" and carries no warranties. FSB does not warrant or guarantee the accuracy, reliability, and completeness of the content on this blog.