4 Reasons I Keep Barely Any Money in My Checking Account
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I used to have one single checking account for all my money. At one point, I built up over $30,000 in there because that's where my "savings" lived.
Then I discovered high-yield savings accounts.
No, not the regular savings accounts at big banks that pay you dust. I'm talking about real high-yield accounts that offer massive interest rates and the same FDIC protections as the old-school banks.
Once I did the math, I realized: The more money I kept in checking, the more I was losing to inflation and missed growth.
So these days, I keep my checking account as lean as possible -- just enough for bills and spending money. The rest goes where it can grow.
Here's why I don't let cash pile up in checking anymore.
1. My checking account pays 0.01% APY (yours probably does too)
Most checking accounts earn close to zero interest. Mine earns 0.01% APY, which is basically the bank's way of saying, "Thanks for the free loan."
I used to ignore this because I didn't know any better. Most people don't unless they pay attention to the fine print.
Once I opened a high-yield savings account (HYSA) and saw that I could earn $30, $50, even $80 per month in interest with zero effort… it was game over. I've earned over $2,000 in bank interest just the past couple years.
So the main reason I keep as little money as possible in checking is because my money earns way more in an HYSA.
2. Big balances made me spend more
This one stings, but it's true. The more I had in my checking account, the more I spent.
Big balances make me feel rich, which loosens my mindset when it comes to splurging buying stuff I really don't need. I'd treat myself a little too often… a new surfboard, another dinner out, something "small" on Amazon.
These days, I only keep enough in my checking account to cover monthly bills and a tiny buffer. The rest sits in a separate account that isn't so easy to dip into.
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The LendingClub LevelUp Savings account has a lot to offer. At the top of the list is its high APY, though you must deposit monthly to earn the best rate. Next is zero account fees, a strong and straightforward perk. Finally, you get a free ATM card, which you can use to withdraw from thousands of ATMs nationwide. Interested? You can open an account with $0.
3. I'd rather invest than let it sit
I actually have a "full" emergency fund right now. I keep about $25,000 in a high-yield account in case I need cash in a pinch.
Beyond that, every extra dollar goes straight to my investments. Because compound growth over the long run beats regular bank accounts any day.
My wife and I started investing about $500/month into Roth IRAs nearly a decade ago. We didn't think much of it at first -- just set it and forget it.
But now those accounts are worth over $230,000. We'd have less than half that if we just kept the money in regular bank accounts.
4. Lean balances = lower risk
Carrying around a debit card linked to a huge bank balance makes me feel a little uneasy. If my card got skimmed or I clicked the wrong sketchy email, thousands of dollars could be at risk (even if it's just temporary).
I feel way better having a small balance in my checking account. I know getting hacked is pretty rare, and most accounts come with fraud protection. But still, I just sleep better knowing my money is spread across different accounts.
Peace of mind is priceless.
Got too much sitting in your checking?
If you've got more than one month of expenses in your checking account, that extra cash could be working way harder.
It's time to move it somewhere better.
You don't need to completely switch banks. Just open a separate high-yield savings account and transfer the surplus cash. You'll earn way more interest, avoid unnecessary spending temptations, and keep your financial system running smooth.
Checking accounts are meant for flow -- not storage.
Check out our top-rated high-yield savings accounts. Your money deserves better than 0.01%.
Our Research Expert
Joel O’Leary is a full-time Personal Finance Writer at Motley Fool Money, covering credit cards, bank accounts, investing, mortgages, and other personal finance topics. Joel has been writing about personal finance since 2018, previously leading editorial content for the How To Money podcast and serving as a resident writer at Budgets Are Sexy. He bought his first rental property at age 18, funding the down payment with savings from his high school job at McDonald’s -- a testament to his lifelong passion for smart money decisions. His work aims to make personal finance accessible and actionable for everyday readers. When he’s not writing, Joel enjoys surfing and spending time with his family.