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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
nwcynic
February 27, 2013 at 9:38 pm

The stock market is only up due to Fed Bond buying money being dumped in the market. Most retail investors are wisely out of the market. If you are paying attention to the actual retail data, economic data and income data you'll realize that all is not well in the US and the minute that the Fed stops giving the banks all this free money to pour into the stock market - the party is over.

The EU is still imploding, the UK is next, then the tidal wave of sorrow will hit the US and the market will crash once again. Keep your money safe and away from the ponzi scheme that is the current stock market.

roger
February 27, 2013 at 9:13 pm

Keep you cash folks. Don't be lured into the stock market. It's a scam of algorithyms and flash trading where the suckers loose and the Goldman Sachs bast$#@% win.

Pa
February 26, 2013 at 12:40 pm

3%.?....??? Where.....i cannot find a 3%.

Jeremy Hamilton
February 22, 2013 at 1:32 pm

It seems like a no brainer to me. I have worked for WarrenFCU.com for the past 10 years. Our members love the 3.01% on our Extreme Checking account. I don't keep a lot of money in my checking account, but I do like that checking account refunds ATM fees every month. I have always thought it like throwing money away every month, if you are paying a monthly fee for your checking account.

Claes Bell
February 22, 2013 at 9:21 am

Hi Marian,

Bankrate's CD rate table shows 1-year CD rates at a few banks that are over 1 percent, so you might want to look there.

Ray
February 22, 2013 at 9:20 am

If you are seeking maximum yield on your spare cash and your are disciplined, high yield checking is the way to go. You need to jump through hoops like make a certain number of debit card purchases, etc., etc. There's also usually a maximum amount that the high yield will be paid on (such as $25k). I keep a spreadsheet indicating which portion of the balance is "savings" or reserves and which is "checking/checking"; all interest earned goes into "savings/savings". It's like having virtual accounts within a checking account.

Marian
February 22, 2013 at 9:18 am

I have $100.000.00 in mature CD.The bank offer 0.6%rate for 1 year CD .Do I have a better choice to make my money to work better for me?

anon
February 22, 2013 at 8:28 am

After 10 years @ 2% she would have $14,654.39 might as well leave it in checking...

Ron Davidson
February 21, 2013 at 7:57 pm

WOW! 2%! And what do the Banks charge for a Credit Card 14%!

Len
February 21, 2013 at 7:21 pm

"Many online banks and credit unions offer high-yield checking accounts that can pay up to 2 percent annually..."

Really? 2% is considered high-yield while we read about bank managers taking home millions in "bonuses" alone?