Learn With Copper State CU Blog | Arizona Credit Union Blog

How Much Money Should I Keep in My Checking Account?

Written by Copper State Credit Union | September 05, 2024

Checking accounts are typically used to pay for short-term expenses and to manage your cash flow. As a general rule of thumb, it’s a good idea to keep enough money in your checking account to cover at least one month of living expenses. Think of it as a cushion protecting you just in case something costs more than you anticipate, or if you have to pay a bill ahead of time.

The amount you should keep in your checking account will vary based on your income, expenses, and personal preferences. It will be different for everyone, and that’s ok! Let’s take a look at a few factors to help you determine the “perfect balance” for you. 😄

 

What is the Right Amount of Money to Keep in a Checking Account? 

Here are some expenses to consider when deciding how much money you should keep in your checking account:

 

Daily Expenses

Many people use their debit cards—which draw from checking accounts—to buy the things they need each day. They may swipe their card when they need to buy groceries, fill their tanks with gas, or grab a quick meal while running errands. You should keep enough in your account to cover your daily purchases in addition to other expenses. 🚗

If you have a CashBack Checking Account, you’re automatically enrolled to start earning up to 1% cash back each month for your daily purchases. The rewards you earn can be used to pay for other expenses or to grow your savings.

 

Monthly Credit Card Purchases

If you don’t use your debit card as your daily spender, you’ll be hit with a credit card bill to pay each month as well. This payment comes out of your checking account and can vary quite a bit from month to month. You can get a general idea of how much you will need by reviewing your credit card statements for the past year and estimating the monthly average.

Did You Know? Studies show that Americans spend more when they pay with a credit card than they do when they pay with a debit card.1 It's because swiping a credit card feels like imaginary money, so you don't mind spending more of it.

 

We recommend using a CashBack Checking Account so you can still enjoy rewards without going into credit card debt!

 

Monthly Recurring Bills

You should also have enough in your checking account to cover your monthly bills. Some of these expenses are fixed, like your car payment. Others may vary based on your usage, like your electricity bill.

Common expenses to plan for include:

  • Mortgage or rent
  • Car payment
  • Utilities
  • Cell phone
  • Insurance
  • Loan payments
  • Subscriptions and memberships

You may be able to set up monthly recurring payments so that your bills are paid automatically each month, straight from your checking account. This can save valuable time and protect you from incurring late fees. 📨

 

Minimum Balance Requirements

If your checking account has a minimum balance requirement, you should keep enough in the account to avoid fees. Luckily, we do not have a minimum balance requirement. We want you to be able to use your funds as you see fit!

 

Maintain a Financial Buffer

You don’t want to keep only the bare minimum in your checking account, because unexpected costs will pop up.  

Keeping some extra cash in your checking account can give you peace of mind against unexpected expenses, emergencies or fluctuations in your monthly bills. A good example here is our spicy hot Arizona summers, and how much higher your electricity or gas bill is during the hot months. 🔥 That extra money in your checking account may protect you from an overdraft fee or accidental shut-off!

Insider Tip: Ask a staff member to help you link your checking account to your savings account or line of credit. This way, if you ever need to overdraw, you'll have confidence that your purchase will be covered! The remaining balance will be pulled from your linked account (and avoid an overdraft fee!).

No more awkward situations like this. 😅

 

 

Should I Keep The Rest of My Money in a Savings Account?

Because checking accounts earn little or no interest, they aren’t ideal for your savings. Any extra money beyond what you need to keep in your checking account should be directed to a savings account to earn more interest. This will help you build your emergency fund, save for something you need, or grow your retirement savings.

The best type of savings account will depend on your goals and whether you need immediate access to your money.

Here are several types of savings accounts to consider:

 

Traditional Savings Account

These accounts are best for short to medium-savings goals, like an emergency fund or saving for a new car. Their interest rates are usually lower than other savings options. 

With our Savings Account, you only need to maintain an ultra-low minimum balance of $5. 🙌

 

High-Yield Savings Account

These accounts are a hybrid of checking and savings accounts. They usually have higher interest rates than traditional savings accounts but also allow you to write checks or make purchases with a debit card. The number of withdrawals you can make may be limited.

Money market accounts usually have higher minimum balance requirements than traditional savings accounts. Our High-Yield Savings Account, however, doesn’t have any minimum balance requirements and enables you to earn tiered interest rates depending on how much you invest. 

 

Based on current interest rates as of 9/1/2024

Sweet Savings! The infographic above shows the amount of interest you'd earn on an initial balance of $10,000 over five years in a High-Yield Savings Account compared to the interest earned if those same funds were sitting in a traditional Savings Account.

Certificate of Deposit (CD)

This is a type of savings account where the money you deposit stays in the account until a certain date, referred to as the maturity date. The terms vary and can be a few months to several years. CDs typically have higher interest rates than other savings accounts. 

Our certificates have multiple short and long-term options and you can get started with a minimum of $500.

 

Individual Retirement Account (IRA)

This is a special account that is used to save for retirement. With a traditional IRA, your contributions grow tax-deferred, which means you aren’t taxed on the money in your account until you retire and start making withdrawals. IRAs invest your money in stocks, bonds, and other assets. Definitely talk to a trusted financial advisor about this one!

 

The Copper State Credit Union Advantage

Not all checking accounts are the same, and some have more or higher fees than others. 

If you are looking for the best checking account, be sure to check out what credit unions have to offer. Because we’re a nonprofit organization, we offer lower fees and provide superior member service

Click below to learn about the advantages of opening a credit union checking account!

This article is intended to be a general resource only and is not intended to be nor does it constitute legal advice. Any recommendations are based on opinion only. Rates, terms and conditions are subject to change and may vary based on creditworthiness, qualifications, and collateral conditions. All loans subject to approval.

Resources:

1 Federal Reserve Bank of Boston