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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
KAC
April 05, 2013 at 6:39 pm

I was getting the 2.25% rate (on the first 10k) in my checking account...now it has dropped to 1.58%

Yomo
April 04, 2013 at 4:27 pm

I'm definitely one of these people. Checking/Savings interest rates are so nominal at this stage it's almost pointless. Don't get me wrong, I still invest money in a 401K but I do bank are certain amount of money because liquidity is king. I have peace of mind that if I were to get laid off, I could pay my bills for the next 6 months. In the future, when this horrible economy isn't threatening everything I've worked for, I may lighten that number up a bit. I'm sure a lot of individuals are thinking the same thing.

Bob
April 04, 2013 at 8:20 am

Yet another article using logic from the past that doesn't work today. Although they mention "you could earn 2%" the reality is the average high-interest checking or MMA is paying 0.5% - so this person is losing a whopping $5 a month.
How much should you keep in your checking account? As much as you need to make you feel comfortable.

Sam
April 03, 2013 at 11:07 pm

CDs are pointless right now. At below-inflation interest rates hovering around one percent, any interest you could earn by moving your money would be dwarfed by a single overdraft fee. Keeping a few grand in checking is a fine idea, really, as long as you're fairly debt-free. Any emergency comes up, you handle it without breaking a sweat. Done. That's worth forgoing half a percentage point in interest.

Bruce
April 03, 2013 at 9:28 pm

Maybe if banks WOULD start paying decent interest on people's money, thing would turn around a bit. Listen, the banks got BILLIONS of taxpayer dollars but the only ones who benefited were that banks and their CEOs.Star giving some back and there may be more confidence in the banking industry. The fact that even with mortgages as low as 2.5%, the banks still make a boatload of money on them over 20 or 30 years. Credit Card interest rates are CRIMINAL. And that is why so many people are defaulting on CC debt. I had a $500 balance on a CC but I was diagnosed with cancer 2 years ago and had to stop working. My balance is now over $2000.
If I couldn't pay $500 , how in Hell do they expect I can pay $2000?

ikeidk
April 02, 2013 at 12:25 pm

I think the actual joke was that in her 40's, Lemon only has about $12k to her name. Not that she keeps her money in a checking account that earns .0025% vs. a CD that maybe earns 1%.

flipper
April 02, 2013 at 11:08 am

Some bonds, municipal or corporate are good income producers for the little guy, cash wise, but you have to search for them. Vanguard.com are the cheapest expense funds out there. Or right next to it.You can get money out in two or three days if you need it, with no charge.Just ask 'how'.

JimC
April 02, 2013 at 12:03 am

I keep mine in a real estate investment trust (REIT) which pays quarterly dividends which amount to about 15% annually.

Sheila
April 01, 2013 at 10:31 pm

I get 2.5% on my checking account at the credit union. I can't find a CD that pays that. Why wouldn't I keep my cash there?

JHT
April 01, 2013 at 6:38 pm

Or maybe there is more in checking because most folks spend all their money these days. Saving was a thing people used to do before both spouses had to work.