Have Lots of Money in Your Checking Account? Here Are 5 Better Places to Keep Your Cash

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KEY POINTS

  • It's not recommended to keep too much money in your checking account because of low interest rates.
  • For a better return without any risk, put your money in a high-yield savings account or a CD.
  • Invest through retirement accounts or an individual brokerage account if you want to maximize growth.


You don't want to keep too much money in your checking account.

Having lots of money in your checking account could seem like a good thing, but there are actually some downsides to this. Most checking accounts don't pay much interest, so you'll be missing out on money you could be earning. There's also the risk of having money in your account stolen if someone gets their hands on your debit card.

Checking accounts are great for money management, like receiving your paycheck and paying bills. But for large balances, there are several better options to consider.

1. High-yield savings accounts

High-yield savings accounts offer much higher interest rates than the national average. It's normally online banks that have this type of account, and they're able to pay more interest because they aren't spending money on operating physical branches. Most of these accounts also don't have any monthly maintenance fees to worry about.

The other benefits of a high-yield savings account are that your money is secure and you can access it at any time. There's no way your balance can lose value, and just about all these banks are covered by FDIC insurance. You can also make withdrawals whenever you want without penalty.

2. Retirement accounts

If you'd like to use your extra money to build wealth, retirement accounts are an excellent choice. You can deposit that money into a traditional individual retirement account (IRA) or a Roth IRA, and then choose investments for it, such as mutual funds. Both of these retirement accounts help you save on taxes, but in different ways:

  • Traditional IRAs allow you to deduct contributions from your taxes. You only pay taxes when you make withdrawals.
  • Roth IRAs allow you to make tax-free withdrawals. Contributions aren't tax-deductible.

Since these are retirement plans, you can start withdrawing money from them at age 59 1/2. Any sooner, and you'll incur an early withdrawal penalty. Roth IRAs allow you to withdraw your contributions penalty free, though.

There are also annual IRA contribution limits. The limit in 2023 is $6,500 in total contributions if you're under 50 and $7,500 if you're 50 or older. You can split that up however you'd like between the two types of IRAs. For example, if you want an even split, you could put $3,250 in a traditional IRA and another $3,250 in a Roth IRA.

3. Individual brokerage accounts

Another way to invest money and build wealth is by opening an individual brokerage account. With any of the top stock brokers, you'll have a wide variety of investment options to choose from, including:

You don't get the tax savings of an IRA or a Roth IRA this way, but you can withdraw money at any age without penalties. There's also no limit to how much you can contribute to an individual brokerage account.

4. Certificates of deposit (CDs)

Certificates of deposit (CDs) pay a fixed interest rate over a set term length. Terms generally range from six months to five years, and CD rates are higher if you commit to a longer term.

Like savings accounts, CDs are a good choice if you want a safe place to earn interest on your money. There's no risk of losing the money you deposit. The difference is that you can't take out your money until the CD reaches the maturity date, which is the end of its term. If you need to make a withdrawal before then, there's an early withdrawal penalty taken from the interest you've earned.

5. Treasury bonds, notes, and bills

Treasury bonds, notes, and bills are debt obligations backed by the U.S. Treasury Department. The U.S. government issues these to fund projects. When you buy them, you're essentially loaning the government money and getting paid interest periodically in return. Here's the difference between bonds, bills, and notes:

  • Treasury bonds have terms of 20 to 30 years.
  • Treasury notes have terms of two to 10 years.
  • Treasury bills have terms of four to 52 weeks.

If you want to invest with hardly any risk of losing money, Treasury bonds are a decent choice right now. That also applies to Treasury notes and bills. You can earn a reasonable interest rate, and since your investment is backed by the U.S. government, it's highly unlikely there will be any payment issues.

All of the options above offer much greater returns than you'd get with a checking account. There is some risk involved if you invest your money, but you can minimize this by choosing good long-term investments, like the S&P 500. Keep money to pay your bills in your checking account, but for the rest of your cash, go with a more lucrative option.

These savings accounts are FDIC insured and could earn you 11x your bank

Many people are missing out on guaranteed returns as their money languishes in a big bank savings account earning next to no interest. Our picks of the best online savings accounts can earn you 11x the national average savings account rate. Click here to uncover the best-in-class accounts that landed a spot on our short list of the best savings accounts for 2024.

Two of our top online savings account picks:

Rates as of Feb 23, 2024 Ratings Methodology
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SoFi Checking and Savings American Express® High Yield Savings
Member FDIC. Member FDIC.
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APY: up to 4.60%

APY: 4.35%

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