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How Much Money Should I Keep in My Checking Account?

What you'll learn: How much money to keep in your checking account


A checking account is empowering. It allows you to access cash, make purchases, and pay your bills. Plus, with online and mobile features and services, such as 24/7 access to your account, direct deposit, and bill payment, managing your checking account can be quick and convenient.

When it comes to how much money you should keep in your checking account, the answer depends on your financial situation. Here are the ways to figure out what works best for you.

Decide on a Monthly Checking Balance

Determining how much you need each month to cover your bills and day-to-day expenses is a good starting point for calculating how much money to keep in your checking account. We recommend keeping one to two months' worth of regular spending in your checking account.

So how does that translate for you? Think about your monthly automatic payments and other costs such as:

  • Mortgage/rent
  • Transportation
  • Credit card
  • Student loan
  • Utilities
  • Internet and streaming services
  • Phone
  • Healthcare
  • Groceries

You can efficiently track your expenses by using a personal finance app, checking your account balance online, or using the mobile banking app from your credit union or bank.

The U.S. average household checking account balance was $10,618 in 2019. The median household checking account balance was $2,000.

Maintain a Minimum Balance

Making sure you don't fall beneath your financial institution's minimum balance requirement is another factor when deciding how much money to keep in your checking account. Most credit unions and banks require you to have a certain minimum balance in your checking account to keep it open and avoid fees. These balance amounts can range from $5 – $1,000.

Cushion Your Balance to Avoid Overdrafts

Factoring a buffer amount into your monthly balance can help you account for extra expenses, such as seasonal fluctuations with utility bills, holidays, birthdays, or other special occasions. This can also help you avoid overdrafts, which may occur when you make a purchase that's more than the amount in your checking account — and often involves a hefty fine.

Depending on your comfort zone, aim to keep enough to cover 30% of your monthly expenses in your checking account to protect yourself against potential overdrafts.

What is Overdraft Protection?

Overdraft protection is a feature that covers purchases and transactions you make if you don't have enough money in your checking account (which despite your best intentions, can happen sometimes).

Basically, overdraft protection allows transactions such as checks, debit card purchases, and ATM withdrawals to still clear when you’ve overdrawn from your checking account. The money used to cover the transactions comes from another backup account, such as your savings account, a credit card, or line of credit, that’s linked to your checking.

Although overdraft protection can give you peace of mind in case you overdraw, here's why you don't want to rely on it:

  • You're responsible for paying back the amount you've borrowed from your backup account. Financial institutions generally charge an overdraft fee, which can be anywhere from $20 – $50, or more.
  • If your backup source is a line of credit, you'll also have to pay interest on that borrowed amount until you pay it down.
  • If the amount you overdraw is more than the amount in your backup account, your transaction will be declined.

Use Leftover Income Wisely

Once you have a good idea of how much you need in checking to cover your bills, basics, and buffer, your next step is deciding how to manage anything left over. Deposit the leftover money into a high-yield savings account, start an emergency fund, or add it to your retirement fund. Not only will your money grow faster in these types of accounts, but you'll be less likely to spend it.

Get Financially in Check

Having the right tools and resources can help you determine how much money you should keep in your checking account. If you keep enough to cover regular expenses, stay above any minimum balance requirements, and avoid overdrafts, your checking account will be a great financial resource.

Check Out PenFed's Checking Accounts

See the features and benefits of PenFed's checking account.