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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
Registered Representative
March 06, 2013 at 9:15 pm

That's silly! There are tax free munis yielding more than garbage CDs and savings. Mutual funds, stocks, and bonds are doing well and it is a long term investment anyway. Better talk to someone at Edward Jones!

Joe F
March 06, 2013 at 6:24 pm

CDs ARE a joke now, they don't even keep up with inflation which is pretty low for a while now. I keep more than 12K in my business and personal checking but if you want relatively safe and profitable return I go with corporate bonds

Frugal
March 06, 2013 at 5:08 pm

I keep anout 12K in my BOFA checking account. I don't have to worry about fees. 90% of retail puchases are on a 1% cash back BOFA credit card thats about 4K a month. It is easy I just transfer the money form the checking to the credicard an I make 1%.

I also have about $100K in a Bluehills Bank triangle savings account that pays 1.1%. This a minior pain as you also have to also have a debit card and checking account with them. But they only require 3 transactions a month and don't have any direct deposit requirement.

CDs no longer make sense. And in regard to stocks my grandfather told me to buy low and sell high. And right now stocks are real high. I will buy stocks again when the market gets below 10,000 again and it will.

KELLIEB
March 06, 2013 at 4:36 pm

I have x12 that amount in checking so I can clean it out at any time I want. Theres no where giving any more than 0,01 and thats what mine is too so this article is BOGUS

MDL
March 06, 2013 at 4:35 pm

Look up Kasasa and see if any bank near you carries the accounts. I have two separat Kasasa cash checking accounts both of which yield over 2.25% apr on balances up to $15,000 (it used to be 4+% on balances up to 25k on each but the economy has them slowly backing it down). I keep both accounts at a minimum of 15k balance and earn excellent risk free interest with funds that are fully liquid. It's a no brainer.

Enola Grey
March 06, 2013 at 1:34 pm

I want to know where the "high interest on-line accounts" are. I had money in one of them when the interest was at 5+%, but it has steadily gone down to the current .1%. Tell me where a good high interest one is and I'll put a bunch of money in it.

SuzetteC
March 06, 2013 at 10:14 am

On the one hand, we're told to have three months of money readily available. So, now we're told not to have it in a checking account? Where exactly, then? Where are these "high-yield" accounts where I can have instantaneous 24-hour access to my funds?

Lee
March 06, 2013 at 9:41 am

Old school financial planning rule: 6 months emergency money in easy to access accounts. Savings accounts and checking, no real difference in the available return. CDs have a penalty clause.

If you are getting furloughed for sequestration, a large checking account balance looks real good right now.

David
March 06, 2013 at 7:28 am

The Fed sets rates low to encourage cash to be used in the market vs saving it. They want you to borrow money (thus low rates) and spend it. They'll raise rates to pull that cash back (you'll save vs. borrow). So, in reality, people are doing exactly what they are rationally supposed to do--keeping cash on hand and not dumping it into interest bearing accounts. They are buying cars and houses and things--which is exactly what this economy needs. I'm not really sure why this article makes it sound like no one have any clue why people aren't saving money.

Joe Stalin
March 05, 2013 at 8:11 pm

Why not keep it in the checking account? CDs are only paying 1/4 of 1% interest. Not much incentive to lock up the cash reserves you will need when you are laid-off....