How much money should I keep in my checking account?
Experts recommend that you keep one to two months of living expenses in your checking account, plus a 30% buffer to protect yourself from declined transactions and overdraft fees.
A checking account offers quick and convenient access to your money, making it easy to pay your monthly bills, including rent or mortgage, utilities, insurance, and loan payments. You can also use your checking account for everyday expenses, like groceries, gas, and trips to the doctor.
But checking accounts don’t earn much interest – or any at all. You could be missing out on the bigger earning potential of high-interest savings accounts by keeping all your money in a checking account.
So how much money should you keep in your checking account?
We’ll look at what the experts recommend for checking account usage, the average checking account balance for other Americans, and where else you might want to stash some of your cash.
How much money to keep in your checking account
Most experts recommend having enough money in your checking account to cover one or two months of expenses, plus a 30% buffer.1,2 Your expenses might include:
- Rent or mortgage
- Car payments
- Insurance
- Utilities
- Phone and internet
- Groceries
- Health care
- Child care
Although expenses like dining out, streaming services, and new clothes aren’t necessary, you should also have enough money to cover these and other routine purchases unique to you to ensure you don’t spend more than you have – and get slapped with an overdraft fee.
Having a 30% buffer protects you if you overspend in any given month. A bit of extra money in your checking account can keep you from overdrawing.
Some checking accounts have minimum balance requirements. You may incur a monthly fee if you drop below the minimum balance. Look for checking accounts with no monthly maintenance fees so you don’t have to sweat minimum balances and constantly worry about overdraft charges.
5 benefits of a checking account
Experts recommend keeping one to two months of expenses in your checking account, plus a buffer.
But if checking accounts earn less interest than savings accounts, money market accounts, certificates of deposit (CDs), and (usually) the stock market, why would you want to keep any money in checking? Here are a few reasons:
1. Ability to cover payments
The number one reason to keep money in a checking account is to complete transactions easily. With a checking account, you can swipe a debit card, write a check, use a mobile wallet, or even send money to friends.
You can also set up automatic bill payments online for things like rent and utilities. The money comes right out of your account as scheduled, so you don’t have to worry about missing any important payments.
2. Avoiding fees
Because we use our checking accounts to pay for so much, whether with a debit card or online bill pay, it’s crucial to keep enough money in your account to cover all of your spending.
The transaction could be declined if you spend more money than you have in your account. You could then incur non-sufficient funds fees from your bank and late fees from the company where the transaction was declined.
Alternatively, the payment could still go through even though you don’t have the funds, and your bank could charge you an overdraft fee.
3. Early paycheck access
Some financial institutions, including Chime, allow you to get paid early3 when you set up direct deposit to your checking account. Early paycheck access can be a huge perk when you need cash ASAP to pay for bills and groceries.
4. Having money for holds
Some merchants place holds when you use your debit card. This is common when renting a hotel room and buying gas.
When the merchant holds some of the funds on your card, you’ll have less money available to spend. Keeping more money in your checking account ensures you have enough funds, even if there’s a hold on your card.
5. Liquidity
Having fast and easy access to your money is the main benefit of a checking account. If too much of your money is tied up in investments, like stocks or CDs that don’t mature for several months, it can be challenging to spend your money when you need it.
Even money in savings is a little less available (or less “liquid”) than money in your checking account. You’ll need to transfer the funds in your savings to a checking account or withdraw it from a bank or ATM.
Average checking account balance
Wondering how much money to keep in checking? You might consider what other people are doing as a benchmark for your plan.
The 2019 Federal Reserve Survey of Consumer Finances found that the average person has $41,600 across their transaction accounts,2 but high-income earners skew the average.
Looking at the median account balance data point from this survey paints a slightly more accurate picture: It’s $5,300, not $42,000.2 That’s across all types of bank accounts, not just checking accounts.
More recent data from J.P. Morgan Chase may be more helpful. The bank found that the median checking account balance for low-income Americans is roughly $1,300.3
Because everyone’s financial situations are different, we recommend not focusing on the average checking account balance. Instead, calculate your monthly expenses and try to keep one to two months’ worth of expenses in your checking account, plus a buffer.
How much money can you have in a checking account?
“How much money should I keep in my checking account?” is a fairly common question. Less common is how much you can have in checking. So, is there a limit?
Typically, banks and credit unions don’t have maximum deposit limits on checking and savings accounts. Even so, you probably don’t want to put too much money in your checking account.
Most checking accounts don’t earn interest (or earn a meager amount). Plus, the Federal Deposit Insurance Corporation (FDIC) only insures deposits up to $250,000 per depositor, per account ownership type, per financial institution.
Checking vs. savings account: Which is better to keep your money?
Many people have both checking and saving accounts. But how do we know where to keep our money?
Track your spending for a few months to calculate your average monthly spending. Include your routine purchases and payments that are automatically deducted from your checking account.
From there, ensure your checking account always has one to two months’ worth of those expenses, plus a buffer.
Beyond that, you can keep money in your savings account to earn more interest, especially if it’s a high-interest savings account.
If you don’t already have one, consider opening a savings account at the same bank as your checking account. This makes transferring money back and forth easy and can act as an overdraft buffer.
Another option is to open a savings account at a different bank, such as an online bank. While transfers between checking and savings may take a bit longer, this can be a smart way to snag a higher interest rate on a high-yield savings account.
What to do with extra money you don't need in your checking account
Once you’ve got enough money in your checking account, what should you do with any leftover funds? We’ve got a few suggestions:
1. Put it in a high-yield savings account
While some checking accounts offer interest on the balance, it’s not usually a competitive rate. You’ll get the highest returns from a dedicated savings account, especially a high-yield savings account or money market account.
2. Start an emergency fund
Creating an emergency fund is one of the best things you can do for your finances if you have extra money to save.
Experts generally recommend keeping three to six months of living expenses in your emergency fund. This money can help you if you lose a job or incur a large unexpected expense – like a car repair or an emergency vet bill.
You can keep your emergency fund in your primary savings account if you won’t be tempted to touch it. If the temptation is strong to spend it on things like a vacation, consider opening a separate bank account for your emergency fund, where you won’t touch it unless you need it.
Just make sure that the separate account earns interest (and a lot of it!).
3. Pay down debt
If you have extra cash outside your monthly expenses and you have high-interest debt, put some of those additional funds toward credit card and loan payments. Check out our guide to fitting debt payments into your monthly budget if you need help making a plan.
Even if you only bring your balances down a little, it will improve your overall financial situation and boost your credit score.
4. Start investing
If you’ve paid down your debt and built a healthy emergency fund, consider investing your money in the stock market or real estate.
Saving for retirement with an IRA or 401(k) is especially wise. Some employers may even match 401(k) contributions!
Using your checking account to your advantage
Determining how much money to keep in your checking account depends on your personal finances, monthly expenses, and spending habits. Using a checking account in tandem with a savings account can prevent overdrafts, meet financial goals, and earn a little interest along the way.
Ready to begin your personal finance journey? Here’s how to open a checking account in four easy steps.
FAQs
How often should I move money from checking to savings?
You should move money from checking to savings only when you have enough money in checking to cover your bills. Then you can transfer some money to savings to earn more interest on your funds.
If you’d rather not do this manually every month, you may be able to set up automatic transfers from checking to savings in your mobile banking app.
How much money do I need to open another bank account?
Many banks have minimum deposit requirements to open a new account. This minimum deposit will vary from one bank to the next and depends on the type of account you open.
However, you can open a bank account with no money. There’s no minimum deposit requirement when you open a Chime checking account, for instance, so you can put as little (or as much!) in your account as you’d like.
What is considered a safe amount to keep in my checking account?
Experts recommend keeping one to two months’ worth of expenses in your checking account, plus a 30% buffer. This ensures you have enough money to cover your recurring bills and everyday expenses – and reduces your risk of overdrafts.
How much does the average person keep in their checking account?
According to a 2019 survey by the Federal Reserve, the average person has $42,000 across all their bank accounts. However, high-income earners skew this data point. Instead, looking at the median amount ($5,300) can give a clearer picture.4
But that’s across all deposit account types. J.P. Morgan Chase also conducted research that looks at median checking account balances specifically: just under $1,300 for low-income families.5
Is it OK to keep all your money in a checking account?
While it’s not against the rules to keep all your money in a checking account, it’s not the best way to grow your wealth. Instead, keep enough money in checking to cover one to two months’ worth of expenses.
Beyond that, consider putting your money in a high-yield savings account, paying down high-interest debt, and even investing in the stock market.
Experts recommend keeping enough money in your checking account to cover one to two months of all your expenses, plus a 30% buffer. The buffer should help keep you from incurring non-sufficient funds fees and overdraft fees.