Why I Keep as Little Money as Possible in My Checking Account
Image source: Joel O'Leary
My checking account used to be the center of my financial universe. Every dollar I earned landed there, and at one point I had over $30,000 just sitting in checking doing absolutely nothing.
Then I learned about high-yield savings accounts (HYSAs), and got smarter about investing. Not only have I earned over $2,000 in bank interest the past few years, I'm on track to retire early with my investments.
Here's why I now intentionally keep my checking account balance as low as possible.
1. Checking accounts pay you peanuts
Did you know the average checking account pays just 0.07% APY? We're talking $7 a year on a $10,000 balance.
Honestly, my checking account with Chase pays less. It's 0.01%. Most big banks are stingy on interest for both checking and savings accounts.
The turning point came a few years ago when I opened my first high-yield savings account. Suddenly, I was earning $40-$50 in interest per month.
This is the main reason I don't store cash in my checking account. It earns nothing for me there.
2. Big balances gave me a false sense of security
When my checking account looked fat, I felt rich. And when I felt rich, I spent a little more than I really should have. Surfboards, dinners out, random "treat myself" purchases.
These days, I keep only about one month's worth of expenses in my checking account, plus a small cushion.
My larger cash savings pile (emergency funds, short-term savings) sits in at a completely separate bank. It earns top interest over there, and it's out of sight, out of mind. Now I make way fewer dumb purchases.
One bank I've been impressed with lately is LendingClub, which offers a top-tier 4.20% APY with $250+ in monthly deposits. Find out more and click to open an account below.
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LendingClub LevelUp Savings
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- Competitive APY
- No fees
- Easy ATM access
- Unlimited number of external transfers (up to daily transaction limits)
- Requires you to make monthly deposits to earn the best APY
- ACH outbound transfers limited to $10,000 per day for some accounts
- No branch access; online only
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'm prioritizing investments
These days, my number one priority for any extra cash is investing. The more I sock away (and the sooner I do it) the longer that money has to compound.
Even tiny amounts can snowball into massive wealth over the years.
About nine years ago, my wife and I both opened Roth IRAs and started putting in about $500 a month each. We invested consistently in index funds which have a historical 10% average annual growth. Today, those accounts together sit at $223,000 -- all from steady contributions and compound growth.
Checking accounts will never create that kind of wealth. They're just a short-term holding pen. Investments are where the real wealth-building happens.
4. Smaller balances = less stress
Walking around with a debit card that's directly tied to a checking account holding $20,000 always felt weird to me. One wrong swipe, one scam, or one slip-up and a huge chunk of cash could be at risk.
But when there's only about $1,500 in my checking, I feel a lot better. If a scammer hacks into my checking account, they're not going to find much.
Yes, I do have fraud protection with my bank, but keeping my balance lean limits how much is exposed -- and just helps me sleep better at night.
I give every dollar a job
My day-to-day spending money lives in a checking account. Short-term savings and emergency funds are in an HYSA earning top interest. And everything else is invested for the long haul.
That simple mindset shift -- assigning every dollar to the right job -- has completely changed how I manage money.
If your checking account is the center of your financial world, I encourage you to step outside your comfort zone. Open an HYSA for your savings, and begin investing excess cash. Your money should be working for you (not the other way round).
If you're looking for a separate place to keep your savings safe and earning more, check out our list of the best high-yield savings accounts. Some are offering APYs over 4.00%!
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.