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$12K in checking? You’re Lemon-ing

By Claes Bell, CFA · Bankrate.com
Thursday, February 21, 2013
Posted: 5 pm ET

We are all Liz Lemon.

In one of the early episodes of the recently concluded NBC series "30 Rock," Jack Donaghy, played by Alec Baldwin, asks Tina Fey's character Liz Lemon where she invests her money. She replies, sheepishly, "I have like 12 grand in checking."

But the latest numbers from the Federal Reserve reveal that Liz is far from alone in keeping a big chunk of her money in checking. Checking account balances have risen sharply since the financial crisis rocked markets and interest rates on certificates of deposit have fallen to all-time lows. Now, there is $902 billion sitting in American checking accounts, the highest it's been since the Fed began collecting data in 1959.

In fact, the amount of money sitting in checking accounts actually has exceeded the total amount in CDs since late 2011, which hasn't been the case since the early '70s.

Of course, you could always put your savings into a balanced portfolio of stocks and bonds designed to grow wealth over the long term. But if you're committed to keeping a ton of cash in a checking account, there are ways to earn a return.

Many online banks and credit unions offer high-yield checking accounts that can pay up to 2 percent annually on your checking account funds as long as you meet a few conditions such as making a minimum number of transactions per month.

If that doesn't work for you, you can always link your checking account to a high-interest online savings account.

What do you think? Do you have most of your money in a checking account? Are you earning any interest on it?

Follow me on Twitter: @ClaesBell

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234 Comments
Austin Seofirm
April 22, 2013 at 6:02 pm

Only a slimy banker would call 2% 'high yield'. Of course, that's a much better deal than they give Uncle Sam, from whom they borrow for approximately 0%.

Don't waste your time with a savings account -- you can make a lot more investing in a lobbyist or congressman.

LESTER LANCASTER
April 21, 2013 at 11:59 am

That 'high yield' 2% account will pay you less than 6 cents per day on $1000. [1000 x .02 divided by 360]
Loan that thousand to me and I will cladly pay you 10 cents per day.
Therefore...you would get 67% more by loaning to me instead of the bank or credit union. [10 divided by 6] - 1
Figures lie and liers figure...
Three kinds of lies: lies, d--- lies, and statistics...

sanjosemike
April 20, 2013 at 8:10 pm

I did a quick review of so-called "high yield" checking accounts. I think the highest was 2.75%, which is very good, but they have a cap of 20,000 dollars on the size of the account.

Some people keep a very high balance in their checking accounts. We do, and frankly it is dumb. We should transfer excess dollars into a savings account with a higher return every month.

I am now listening to my own advice. You can do all these transfers on line, even from your iphone.

sanjosemike

Nat
April 19, 2013 at 9:39 pm

Don't forget Uncle Sam gets a third of that .65%

Kyle
April 19, 2013 at 8:47 pm

How come a low interest credit card rate is 14% but 2% is high yield for checking? Who is defining high and low here? I would take a low 14% yield any day on my savings!

Holly
April 19, 2013 at 8:30 pm

Um, there isn't a checking account anywhere that I can find that pays more than .65%, so what planet are you people living on? Savings accounts don't even pay that. Martin, who do you bank with that gives you more than a CD on checking?

Geoff
April 17, 2013 at 8:35 pm

And do what else with your cash? Invest it in a scam market, where Wall Street makes up the rules as they go, politicians and Justice turn a blind eye, and no one ever goes to jail? Worthless CDs?

Martin
April 17, 2013 at 5:32 pm

I keep north of 100K in my checking account. Why bother with a cd when you can get just as much in the high yield checking.

jay
April 16, 2013 at 5:30 pm

I'm surprised there's as much money in CDs as there is. CDs today pay almost as much as keeping your money under your pillow.