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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
ian
February 28, 2013 at 3:17 pm

CD's and high-yield checking accounts are fine but they completely limit you to small gains. Although these pan out in the long run compared to the ups and downs of the market, there are better ways. Fixed Indexed Annuities, particularly those from Allianz, have shown to be especially strong. Depending on the allocation/crediting, you can have Blue Sky potential, with a very reasonable spread. Bill Gross is a the Chief Investor for Allianz. Look him up, the mans a genious. He's the most successful low-risk money manager on the planet. This guy managed HUGE pensions back when they were actually sustainable, by investing principle into bond funds, and using the returns to purchase call options for the amount of principle. This gives opportunity for big returns, with no downside risk.

richardp
February 28, 2013 at 8:15 am

I have CDs with ALLY. No-Penalty CDs. Just cashed a 11-month CD early with no penalty. Took 5 days to get the money but lesson learned. Have only 5K in checking with rest in No Penalty CDs.
Rate is only slightly higher than savings account.
I pulled out of stocks back in 2000. What I put in was being lost by the market.
My main reason not to be in the stock market is from a new report with an insider of the stock market. He related a story how they would move money earned from a small investor to a big investor (i.e. senator or congressman). The small investor has no way to know what the closing price was when the transaction was made.
It's also been reported how congressional people bet the market averages over something like 35% of the time.....insider trading???

Dan
February 28, 2013 at 6:57 am

I keep a substantial amount of money in a checking as well. No need to put it in a CD or the like when the returns are minimal compared to an interest bearing checking account. If indeed access to my cash in the checking account I can get it without a problem...if it's stuck in a CD I can get it and pay any early withdrawal penalty that would wipeout any gains. The way things are going I think I want the quickest access to my cash. Pretty soon it'll be under my mattress where it will be earning almost as much.

roger
February 27, 2013 at 11:41 pm

Right on, mike. I get out the word every blog and conversation I can. Unfortunately, like PT Barnum said, 'there's a sucker born every minute' though. I've got to admit that it's maddening to get such low returns at a bank but hopefully inflation will finally come roaring back in my lifetime and I can get 5 to 6% at least on money market and CD's. But you've got to get ready for that by getting out of debt as much as possible. Paying off your mortgage is a no brainer. The 3 to 4% interest you pay to the bank goes in YOUR pocket. Good luck.

Mike
February 27, 2013 at 11:32 pm

I have waaaaay more that $12,000 in my checking account. It's probably losing money even as I write because of inflation (been shopping or bought gas lately Bernanke!?) However, it's safe because of the FDIC. I wouldn't put a dime into stocks. Those s-umbags on Wall Street just cannot be trusted. Their method of making money (mostly for them) is manipulation. Up, down, skim, up, down, skim, etc. Period. Added that, there should be laws to stop Wall Street touching 401k contributions. Thank goodness they never got their thieving hands on the "proposed" private Social Security scheme(s).

roger
February 27, 2013 at 11:10 pm

Good comment, colk. We need to keep getting the truth out for the sheep. Would you mind sharing those high paying checking accounts?

roger
February 27, 2013 at 11:07 pm

Bully for you bob, but I just don't believe it nor I'd wager most of the folks on this thread. You're probably a shill for Jaime Dimon at Morgan, but nice try...

roger
February 27, 2013 at 10:55 pm

Amen, Nwcynic. Smart folks will realize the stages of capital:

Capital accumulation
Capital appreciation
Capital preservation

Unfortunately, in this brave new world of the Obama Agenda there is one more:

Captial confiscation Believe me. It's comin'...

COLK
February 27, 2013 at 10:45 pm

I invested my Deferred Comp in a low risk big cap famous mutual fund and after 15 years I lost $5000 in principle. Fortunately I had two careers in which I had traditional retirements so I didn't need the Deferred Comp. The only people who make money in investments of any kind are insiders. The market is a suckers game and always has been. I currently keep my money in checking accounts that pay higher rates than CDs.

bob
February 27, 2013 at 9:40 pm

I put money into Chase last May and have earned 39% so far. Yes Roger, that is J.P. Morgan Chase stock not a bank account. Yes, the stock market has risks and volatility, but it is not a casino if you have a brain, do a little research and pay attention. Even without the stock price appreciation, I am earning better than 3% in dividends on which I pay a lower tax rate than I would if I had bought a 2% CD. Do I have money in the bank as well? Yes, of course. Don't keep all your eggs in one basket.