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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
Buckey
March 05, 2013 at 4:19 pm

Well.... We invested in 30 yr T-Bond when they were 5%, we have done well since the yield are at 3%. We also got into gold @ $300 but got out about $1250. Sadly I also own some junior mining stocks which have been crushed especially by lack of access to capital.

lon juan
March 04, 2013 at 5:33 pm

The real rate of inflation is between 6 and 8 percent conservatively. If you get 1% in a bank you are getting negative 7% interest. That's how thew fed steals your money by inflating away the purchasing power of your currency. Buy physical gold and sliver. Have faith.

FYI the writer of this article is an economic neophyte. No one should listen to anything she says. I would put capital in credit unions and regional banks...much safer. I would be long energy, agriculture, water, oil and nat gas as well. just a humble economists opinion. Also I would go long interest rates and long the vix.

Ashish
March 04, 2013 at 3:46 pm

the best option for risk free return is online savings account like ING Direct (now Capitalone). you get 0.75% interest accrued monthly. and you can withdraw money whenever you want. Just make sure you have at least 3 days of notice before you need money, because that is the amount of time it takes to transfer from ING to your checking account.

SN
March 04, 2013 at 11:10 am

The reason behind the low interest rates is that the government is basicaly forcing people to get back into the stock market. The next crash is going to be bad. I guess they won't be happy until your living n a cardboard box.

MS
March 04, 2013 at 11:02 am

JB, I think you're forgetting the billions of dollars that US citizens gave to those banks. They were supposed to use it to bolster the economy durring a recession. Instead, they bolstered their pockets.

smartalecktexan
March 04, 2013 at 10:03 am

The .02 percent on our checking AND savings at BOA really sucks! Especially when we read of the BOA CEO receiving a $12,000,000.00 bonus last year!!!!!!

Fladabosco
March 04, 2013 at 9:04 am

The reason so many people keep a ton of money in a checking account is that the fees banks charge in a checking account are so high that it eats up the interest. You may as well keep a chunk of cash there to avoid any kind of fees or penalties.

I checked out some high yield checking accounts and all I could find were tiny (like .10%) yields unless you had a very high balance and did other things they charged a fee for.

JB
March 03, 2013 at 9:10 pm

edward, you don't invest money at a bank. You go to a reputable firm like Trowe Price or Vanguard.

JB
March 03, 2013 at 9:08 pm

Nobody is forcing you to have a credit card and pay the rates. Banks have to make money. They can't give you interest when the gov't doesn't give them any either. How do you ya'll think banks work? Credit cards are totally separate from a checking account.

Charlie
March 03, 2013 at 8:53 pm

Not to mention the Interest you pay on the profit.