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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 can be empowering; it helps you manage your finances and plan for what you want to do in the future. What started as a basic service for paying bills and exchanging money has grown and continues to evolve. Now, direct deposit can put your paycheck straight into your checking account. Online bill payment services let you authorize payments for monthly bills without writing checks. And don’t forget, you can use ATMs anywhere to get cash on-the-go from your checking account. People used to choose a financial institution that was closest to their home or work. Today, mobile and online banking make it easy to get to and manage your money 24/7, wherever you are.

You may already take advantage of most of these checking account features, but consider asking yourself, “How much money should I keep in my checking account?” before deciding to open a savings account or other investment options.

Decide on a Monthly Checking Balance That Fits Your Life

It’s logical to prefer capitalizing on the higher dividend rates offered by a savings account or share certificate. But for peace-of-mind day-to-day, first make sure that you have sufficient funds in your checking account to cover bills, everyday expenses, and pre-authorization charges. Once you establish how much money is a comfortable amount to keep in your checking account, you’re free to make regular deposits of additional funds to a high-yield savings account, certificates, or retirement fund. Not only will your money grow faster in such accounts, but you’ll be less likely to spend extra funds accidentally. 

Financial experts recommend keeping one to two months’ worth of regular spending in your checking account. It’s a personal choice and only you know what’s comfortable and affordable. Deciding how much money to keep in checking takes some planning and oversight. Figure out your ideal checking vs. savings and investment balances by following a few important practices.

Maintain Minimum Balance Requirements

Checking accounts often require you to maintain a minimum daily balance to avoid a fee and to keep your account open. Some minimum balances will be as low as $5, while others might be higher, such as $500 or $1,000. PenFed’s Access America checking, for example, requires a $500 daily balance requirement. Keep in mind that banks and credit unions use automated systems that keep precise records. Instead of “winging it,” you may need to keep daily records of your checking balance if you expect sudden bills or large expenses. Even easier, you can regularly check your online banking records. This will help ensure that you meet the minimum required balance at the end of each business day and avoid fees or account closure. You can estimate your spending by tracking expenses with an app such as Mint. It gives you a monthly average of how much you spend, so you can be sure that you have enough in your checking account to cover both the minimum balance and your expenses. 

Keep the Lights On

You may decide to manage your finances by using automated monthly payments for expenses such as utility bills, cable and/or internet services, news or software subscriptions, and automobile or mortgage loans. Opting in for any number of automated payments can add up quickly. Having a buffer in your checking account helps ensure that you always have enough to cover these bills, even if they increase from time to time. Review your previous monthly and quarterly statements, and calculate a base amount for automated payments based on seasonal fluctuations for utilities. Then add that base amount your other budgeted expenses and your required minimum balance. Also consider expenses for special occasions – holidays, vacations, and splurges – when a financial misstep could ruin the fun. 

Cushion Your Checking Balance to Avoid Overdrafts

An overdraft happens when a purchase, which is called a debit, is greater than the amount in your checking account. For example, if you were to make a $40 purchase, but only have $30 in your account, your overdraft will be by $10. Most banks and credit unions charge a fee for an overdraft, anywhere from $20 to $50 or even more. That’s a big bite for a small overdraft. If you open an Access America checking account at PenFed, overdraft protection is available to you subject to credit approval. This protection comes in the form of an overdraft line of credit, which essentially a loan is attached to your checking account.

It is entirely possible to avoid an overdraft by keeping tabs on your account and using these tips about how much money to keep in your checking account. Should life happen though, this protection is available to you. To avoid an overdraft all together, keep extra funds in your checking account above your budgeted expenses and the required minimum balance. When emergencies and unexpected situations arise, you’ll be able to withdraw cash, cover automated payments, and write checks without worrying about fees.

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