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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
bruce wayne
March 20, 2013 at 9:27 pm

I like to keep a couple million in my checking at all time, although banks are not always safe either. This is why my checking account is kept at a low balance. However I always keep 2 or 3 billion on hand in the BATCAVE.

David
March 20, 2013 at 8:19 pm

I read this & laughed. I have $12,500 in checking. What a random number. By the end of this year it will be $25,000

Ryan
March 20, 2013 at 8:07 pm

12K is a lot of money. Having that for a rainy day fund is attainable and practical. If you can **** away 12k on a couple months of living expenses, you need to re-evaluate your lifestyle. Don't blame others for your bad financial decisions.

n
March 20, 2013 at 7:46 pm

You don't get robbed by keeping your money in a checking account... Well, before last weekend it use to be this way at least....

I use to keep a lot in my checking, now I removed it all and it sits in cash in a safe in my house... Due to cyrpus.

Stock market always crashes and always will wiping out generations of savings... At this point if you are in the market you deserve to lose your money. Fool me once, shame on you, fool me twice shame on me, fool me three times and I am mentally stupid.

I dont care about a return, I am trying not to get robbed.

TopDog
March 20, 2013 at 5:39 pm

I have a high checking account balance every month because I have a large monthly income which I spend every month on expenses to survive living in California.

Taji Amen
March 20, 2013 at 4:44 pm

I keep ALL my money in a checking account because the stocket market is a rigged pyramid scheme where John Q public nearly always loses eventually and there are no safe and better interest earning alternatives. I want quick and easy access to my money.

Jennifer
March 20, 2013 at 4:13 pm

We keep a high checking account balance, but also for a reason not mentioned. We keep our budget one month ahead. In other words, we spend February income for March expenses and March income on April expenses. Also, we consider our April 1st mortgage payment to be a March expense. That causes us to have over a months income in our checking account, which helps in case of an emergency in addition to our separate emergency fund and sinking funds for periodic expenses.

kraftykathy
March 20, 2013 at 3:50 pm

Having debit cards does have its benefits but it doesn't build you any credit for when you go to buy a car or a house or even try to get a credit card. Debit cards can be very dangerous -- if someone gets a hold of it, they can empty your account before you know it and you know what, oh well, too bad, you are out the money. With a credit card if someone got a hold of it, you'd only be liable for the first $50, if that. If you want to earn a little money on your cash in the bank, look for a bank that pays interest on your savings or checking account. Something is better than nothing. And your best bet are smaller banks and/or savings and loans that have been around a long time and not the big "monopoly" banks that have a branch on every corner. If you have any plans to make a large purchase in the near future, like a house or car, don't put all your money in a long term CD or other account. If you have to take it out to make that big purchase or do a big repair, you'll pay dearly in penalties when you withdraw the money and you'll never earn that back. Also, use 0% interest offers whenever making large purchase -- washer/dryer, TV, other appliances. What the heck -- float their money!

Tom
March 20, 2013 at 1:34 pm

A debit card is way better than a credit card. A credit card will let you spend money you don't have. I my generation had done that we wouldn't have the bankruptcy problems that we do now.
And yes I agree. There is no reason to put money in a .25% savings account.

CommonSense
March 20, 2013 at 9:32 am

My daughter is one of those people who keep a high balance in her checking account. And the reason is something that I did not see mentioned in the article: a debit card. For reasons that I cannot understand, her generation is in love with debit cards. Rather than purchasing with a credit card and then paying that off once a month, she (and ALL her friends) don't want to "bother" with the monthly credit card payment. They keep all of their money in a checking account to ensure they have enough money to cover whatever they buy with the debit card (since the debit card transaction is more or less immediate). Contributing to the behavior are two factors: 1. the lack of return in a savings account, and 2. debit cards can be had much earlier in their lives than a credit card and, therefore, shapes their behavior earlier.