Keeping an Extra $1K in Your Checking Account? Here's Where You Should Move It

Published on Sept. 3, 2023

Writer

Many or all of the products here are from our partners that compensate us. It’s how we make money. But our editorial integrity ensures our experts’ opinions aren’t influenced by compensation. Terms may apply to offers listed on this page. APY = Annual Percentage Yield. APYs are subject to change at any time without notice.

KEY POINTS

Since the average checking account doesn't offer interest, savers who keep their extra money in a checking account lose out.
By stashing an extra $1,000 in a high-yield savings account, you could earn $45 to $141 in three years.

Keeping some extra money in your checking account is not a bad idea. Doing this can ensure you have enough funds to cover your everyday expenses and give you additional wiggle room. But keeping all your extra money in a checking account isn't the best financial strategy.

Why? Since most checking accounts don't earn interest, you won't have the opportunity to boost your bank account balance in this way. Interest can add up quickly, and any extra money earned is a win for your personal finances.

Do you have an additional $1,000 sitting in your checking account? Find out why you may want to transfer that money to a high-yield savings account soon.

Interest can help you boost your bank account balance

Most checking accounts don't offer interest or rewards. That means there's little incentive to keep your savings here. But if you keep your emergency fund in a bank account that earns interest, your money will grow over time without doing any work.

Our Picks for the Best High-Yield Savings Accounts of 2024

American Express® High Yield Savings APY 4.10% Rate info Min. to earn $0 Open Account for American Express® High Yield Savings On American Express's Secure Website. Member FDIC.	APY 4.10% Rate info	Min. to earn $0
Capital One 360 Performance Savings APY 4.10% Rate info Min. to earn $0 Open Account for Capital One 360 Performance Savings On Capital One's Secure Website. Member FDIC.	APY 4.10% Rate info	Min. to earn $0
CIT Platinum Savings APY 4.70% APY for balances of $5,000 or more Rate info Min. to earn $100 to open account, $5,000 for max APY Open Account for CIT Platinum Savings On CIT's Secure Website. Member FDIC.	APY 4.70% APY for balances of $5,000 or more Rate info	Min. to earn $100 to open account, $5,000 for max APY

As you research savings accounts, pay attention to the annual percentage yields (APYs) you see. Banks use APY to describe the returns you can expect when keeping your money in a savings account for one year. Rates can vary significantly, so it's best to compare accounts to choose the right one.

You may be missing out on extra cash

Are you wondering how much interest you're missing out on by an extra $1,000 in your checking account? It may be more than you think. Below, I'll show you how much money you could earn by stashing an extra $1,000 in a high-yield savings account for one year.

To determine how much interest you'll earn, multiply your deposit ($1,000) by the APY. This will show you how much you'd earn if you kept it all in your savings account for a year.

I used a 4.50% APY for a high-yield savings account for the following calculations. The bank accounts on our best high-yield savings accounts list have APYs ranging from 4.15% to 5.25% -- so I settled somewhere in between.

Bank account type	Interest earned after one year
Checking account (0% APY)	$0
High-Yield Savings Account (4.50% APY)	$45

Source: Writer's calculations

Compound interest is on your side

While $45 may not seem like a ton of money, it's much better than earning $0. Life is expensive, so an extra $45 earned is a big deal. The longer you keep your savings in the bank, the more you can make, thanks to compound interest, which is interest that you earn on interest.

To illustrate the power of compound interest, I'll show you how much money you can make if you keep your initial $1,000 deposit in a high-yield savings account for anywhere from one to three years.

The following calculations assume you make no additional contributions beyond the initial deposit. You can earn even more if you continue to deposit money into your account. For those who want to save regularly, we recommend automating the savings process for simplicity.

Here's a breakdown of the potential earnings:

Year	Starting balance	Interest earned	Ending balance
1	$1,000	$45	$1,045
2	$1,045	$47.03	$1,092.03
3	$1,092.03	$49.14	$1,141.17

Source: Writer's calculations

That's $141.17 earned in three years, assuming the APY on your account doesn't change. It's worth noting that APYs can change over time, so your APY likely won't stay the same rate forever. Now you can see why keeping your extra savings in an interest-earning bank account is a good strategy.

Do this to boost your savings account balance

Saving for emergencies is wise. If you have a savings stash, make sure you're not missing out on interest. By opening a high-yield savings account and keeping your savings there, you can increase your bank account balance as you earn interest. But if you keep every last cent in your checking account, you'll miss out.