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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
Jerry
March 24, 2013 at 3:57 pm

I worked in a small town bank, 50 years ago. Savings paid 4% int., and Mtg. money was 5 l/2 to 6 %. Wages probably were 5.00 per hr. We had lots of money and fun, then. I have very little knowledge of stocks and bonds, but if I had a large amount of cash, I would rent a lock box at bank, and keep it there. Take it out and use it as needed, and don't let the banks or government have use of it. It is yours, to do and spend as you like and they don't need to use your money to play with. If you have a ton of money, build a safe and keep it at home. Don't tell anyone about your finances. If you earned it, and payed all taxes on it, it is your to do as you want. No forms to fill ect. If you want to loan it to some of your closest friends, do so, make them sign some kind of a form, but stay away from banks. They have lots and lots of money, and say that they want to loan you some, but in reality, they would rather invest it on their own and make much more than they would from loaning it to you.

Jazz Cohen
March 24, 2013 at 12:55 pm

I have 100% in magic beans.

Michael
March 23, 2013 at 3:37 pm

With interest rates so low on CDs, it isn't even worth the time to buy them.
I spent over an hour at the bank filling out the paperwork for a $10k CD. When I left the bank, I realized the total interest for the year would be less than I'd make in the hour I lost filling out the paperwork. Plus, it is one more thing to add into income taxes, which wastes even more time. Better just to leave direct deposit in the checking and not waste my time.

Eric
March 22, 2013 at 9:58 pm

I don't see a reason to use a high yield checking accounts or short term cds. The rate of return just doesn't do it for me. I'm not lending the banks and credits unions my money for that type of return. I can find plenty of investments that yield me 8-12% all day long. I trust real estate, even in it's current market.

Ben
March 22, 2013 at 9:36 pm

Also left out is that many smaller banks have higher interest rates on checking than savings accounts and short term cds if you meet certain requirements. Reward Checking.

G
March 22, 2013 at 7:24 pm

I wouldn't get too comfortable with having a lot of money in the bank seeing how it can be confiscated with a single vote of the legislature on behalf of the bank.

Kris
March 22, 2013 at 11:57 am

Many places offer high yield checking accounts with relatively high interest rates. My credit union offers 3% on the first $25k. That's much higher than a savings account or CD so it would be silly to tie it up in a CD or safe investment. Also in the savings account it's readily accessible in an emergency. If you can remember to keep your hands off of it (just because it's in the checking account does not mean that it should be spent on a whim) then it would be silly not to take full advantage of it. $25k per person can be in that and everything else into other investments.

Jeff
March 21, 2013 at 1:28 pm

50% in silver, 20% in property, 15% in short-term 'gains,' and 15% in FRN's.

jeff
March 21, 2013 at 2:32 am

I have about $300k in stocks and bonds, about $100k in real estate with no mortgage, and about $3k of cash on hand. I'm comfortable. I work for myself. I might increase the cash position... but, I have not found a need to do so. I work a budget and seldom venture far from it. CD's don't yield anything and are subject to tax. Same thing with now accounts at the bank or savings and loan. There are lots of good dividend paying stocks out there. And, good bonds as well. And, it's not like the market isn't liquid.

Sam
March 20, 2013 at 11:01 pm

What a silly article. I have heard from financial planners to always have at least 3 months income on hand that you can get to at a moment's notice in case of emergency. Here is an article ridiculing people who actually take that advice? (Granted, a true Savings account would be better, but the article's true comparison is checking to CDs, not checking to savings.)