How much money should you keep in your checking account?

Experts recommend keeping one to two months’ expenses in your checking account, as well as a buffer.

But if checking accounts earn less interest than savings accounts, money market accounts, certificates of deposit (CD), and (usually) the stock market, why would you want to keep any money in check? Here we have a few reasons:

1. The ability to cover payments

The number one reason to keep money in a checking account is to easily complete transactions. With a checking account, you can swipe a debit card, write a check, use a mobile wallet, or even send money to friends.

You can also set up automatic bill payments online for things like rent and utilities. Funds come directly from your account as scheduled, so you don’t have to worry about missing out on any important payments.

2. Avoid fees

Since we use our checking accounts to pay for so much, whether with a debit card or paying bills online, it’s crucial to keep enough funds in your account to cover all of your spending.

The transaction can be declined if you spend more money than you have in your account. You can then incur an insufficient funds fee from your bank and a late fee from the company where the transaction was rejected.

Alternatively, the payment can continue even if you don’t have the funds, and your bank may charge you an overdraft fee.

3. Early access to your paycheck

Some financial institutions, including Chime, allow you to get paid early3 When you set up direct deposit into your checking account. Early access to a paycheck can be a huge advantage when you need cash ASAP to pay bills and groceries.

4. Having the money for the reservation

Some merchants place reservations when you use your debit card. This is common when renting a hotel room and buying gas.

When the merchant holds some money on your card, you’ll have less money to spend. Keeping more money in your checking account ensures that you will have sufficient funds, even if there is a hold on your card.

5. Liquidity

Quick and easy access to your money is the main benefit of a checking account. If a lot of your money is tied up in investments, such as stocks or CDs that don’t mature for several months, it can be difficult to spend your money when you need it.

Even the money in savings is slightly less available (or less “liquid”) than the money in your checking account. You will need to transfer the money in your savings into a checking account or withdraw it from a bank or ATM.

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