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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
Heather
March 25, 2013 at 8:32 pm

People are investing in real estate, despite the collapse in 08, because there's a housing shortage in cities where high income jobs are. Monthly Payments on 2 bdm. condos in Boston are 2500-3000k, easily. The prudent thing to do is hold around 6 months in payments in liquidity, just in case, so I'm not surprised everyone is hoarding cash. It's for a cushion on repairs, payments or hoarding for the downpayment.

Ghost
March 25, 2013 at 8:23 pm

It's safer to the 0.1% in checking and savings rather than risk it in the market or tied up in CD's with large early withdrawal penalties.

I'm "Lemon-ing" in my big bank and also in my credit union that pays a much higher interest rate.

Janel
March 25, 2013 at 4:39 pm

Put the money in stocks so you can lose 40% when the next scandal hits. But don't worry. History says the stock market averages 8% a year for the last 70 years. Therefore, after you lose 40%, wait 70 years, then you'll be good as gold.

:-)

jennyct
March 25, 2013 at 4:14 pm

The only problem with having a interest bearing checking is that your money MUST stay there unless you want to PAY. If you need to use it and it falls below a certain amount, you have to close it. Not worth it.

Allan
March 25, 2013 at 9:48 am

A safer place for your 12,000 dollars is in a fruit jar buried under a rose bush. That way you know where it is and you can get it when you want it.

Chris
March 25, 2013 at 9:21 am

Yea pretty dumb advice, $12k in checking/savings (there isn't really any difference nowadays) is a perfectly reasonable amount to have, in fact it's probably not enough for most people (should have at least 3 months salary completely liquid - as in not locked up in CD's). The problem with high yield checking accounts is they are typically not offered at your local bank, and having the money with your main branch down the road is worth the $240 a year to me.

Ryan
March 25, 2013 at 12:59 am

What a horrible thing to suggest that 12k in checking/savings is being risk-averse...whatever happened to having an emergency fund? I'm young so the rest of my money is all in stocks.

bourneblogger
March 24, 2013 at 11:36 pm

Such a stupid piece of advice... 2% annually of your checking account balance of $12,000 is $240... Big effin' deal!!!! Keep your money out of stocks... The stock market is run by corruption and there's more than a 50% chance you'll lose everything you invested in...

taxpayinghorse
March 24, 2013 at 9:24 pm

buy BBEP stock at TD ameritrade, it has almost 10% interest quarterly.

Jon
March 24, 2013 at 8:06 pm

High-interest checking? Most so called high-interest accounts are <1% now.