How Much Money Should You Keep In Your Checking Account? (2024)

What is the right amount of money to keep in your bank account? Experts typically recommend keeping three to six months’ worth of living expenses stashed away for emergencies in a high-interest savings account. But how much money you keep on hand for everyday expenses is a different story.

Checking accounts are ideal for day-to-day transactions and transfers, but because they often earn little to no interest, they’re not the best place to store all of your extra cash. How much money you should keep in your checking account depends on your financial goals and circ*mstances.

How Much Money Should You Keep In Your Checking Account?

Your checking account is probably where you keep most of the money you use for regular spending. You can typically access checking account funds with a debit card, check, ATM or digital payment app, and there aren’t limits on the number of transactions you can make per month. Checking accounts can be used to receive paychecks, pay bills, make transfers and deposits and more.

As a rule of thumb, you should aim to keep one or two months’ worth of living expenses in your checking account. This amount will be enough for many people to cover recurring bills and smaller purchases before their next paycheck while leaving some extra cushioning to avoid overdrafting with unplanned withdrawals. If you use your debit card often, consider keeping a little more money than this in your account. Exactly how much you need to stay in the clear depends on your income, monthly expenses and lifestyle.

Pay attention to any minimum balance requirements enforced for your account as well. Some checking accounts charge a monthly maintenance fee if your balance dips below a certain minimum, such as $50 or $500, and use your average daily balance to determine if you meet requirements. On the other hand, the best free checking accounts have no such balance minimums to worry about.

What Is the Average Checking Account Balance?

Many factors impact the average checking account balance, and actual balances tend to vary across different income levels. That said, according to the most recent Survey of Consumer Finances conducted by the Federal Reserve Board, the average household had $62,500 in transaction accounts in 2022, an increase of 29% from 2019. However, this category combined checking accounts, savings accounts, money market accounts and prepaid debit cards.

Americans with higher incomes tend to keep more money in their checking accounts than those earning a lower income. There could be a number of different reasons behind this, but high-net-worth individuals likely have higher living expenses.

Why You Shouldn’t Keep Too Little Money in Your Checking Account

You’ll want to keep enough money in your checking account to reduce fees and—if you still use paper checks—to avoid bouncing a check. While you can avoid overdraft fees by linking a savings account to your checking account, banks may still charge fees if you spend beyond the balance in your account. On top of that, merchants may also charge a fee if they have to re-run a transaction because it didn’t go through the first time. Over time, fees can add up, eating away at your balance.

You also want to be mindful of recurring transactions scheduled to come out of your checking account. If you have insufficient funds when your car insurance is supposed to be paid, for example, you could end up with a lapse in coverage, or your insurance might get canceled altogether. You want to make sure you not only have enough to cover your needs but recurring expenses like this too.

One final thing to take into account is the minimum balance requirement. Failing to keep your account in good standing can result in your bank closing your account. This might happen if you have too many overdraft fees that leave your account balance in the red. While it might not seem like a big deal, it may make it difficult to open a new account somewhere else.

Risks of Keeping Too Much Money in Your Checking Account

While you want to make sure you keep enough money in your checking account to cover your expenses, you don’t want to keep too much in it, either.

One reason is that it isn’t going to earn you much interest. The national average for interest-bearing checking accounts is 0.07% APY. Compare that to a high-yield savings account that can earn as high as 5.00% APY or more. If you keep too much money in your checking account, you’ll forfeit the opportunity to earn a higher yield on your cash.

Another reason you want to be mindful of keeping too much money in your checking account is fraud and theft. If your debit card is stolen and you keep a large amount of money in your checking account, a thief can drain your account before you might even realize the money is gone. Keeping enough to cover your expenses—but not too much to put your money at risk—is a good balance to maintain to keep your money safe.

Consider High-Yield Options

If you want the convenience of being able to access your money but are looking for a higher return than you’d get from a typical checking account, you have other options to consider.

Money Market Accounts

Money market accounts are a good compromise between a savings and a checking account. You’ll get a debit card and be able to write checks from the account while earning a higher yield on your cash. With the most competitive money market account offering 5.46%, it offers the same benefit as a high-yield savings account with some of the same features that you’d expect to find in a checking account.

Cash Management Accounts

Another option is a cash management account. These are typically offered by other financial institutions, like brokerage firms, and can be used in tandem with an investment account. Just like a checking account, you’ll receive a debit card that gives you access to your cash. CMAs offer high APYs and don’t typically have monthly maintenance fees.