Accessibility Tools

Highlight Links
High Contrast
Increase Text Size
Decrease Text Size
Reset Text Size

Online Banking

The Right Balance: How Much to Keep in Your Checking Account

One of the most fundamental steps in financial planning and budgeting is determining how much money you should keep in your personal checking account. This amount is important for everyday financial transactions, but striking the right balance can often seem like a high-wire act. This balance requires careful consideration to avoid overexposing your funds to risk or missing out on potential earnings.

Woman at ATM on phone

Is More Cash in Your Checking Account Always Better? Not so Fast

You might assume that keeping a lot of money in a checking account is always advantageous. After all, it gives you instant access to your money and may provide a sense of security. However, this approach isn't always beneficial. Your checking account typically pays minimal, if any, interest. So while your money is safe and readily available, it's also idly sitting, losing purchasing power to inflation. You could be missing out on opportunities to grow that money in other interest-earning accounts.

The Perfect Number

The General Rule of Thumb: 2-3 Months of Living Expenses

The big question is, "How much should I keep in my checking account?" Most financial experts recommend anywhere from one to four months of living expenses as a good baseline. The idea is to have enough to cover your bills and expenses but not so much that you're losing out on potential interest.

How to Calculate 2-3 Months of Living Expenses

Calculating this amount isn't as daunting as it might seem. Start by listing out your regular monthly expenses. This list should include rent or mortgage payments, utility bills, groceries, transportation, health care, debt repayments, and any other recurring expenses. Then, multiply this sum by two or three (depending on your comfort level and financial stability) to get the amount you should aim to keep in your checking account. Remember, everyone's financial situation is unique, and this calculation should reflect your own personal circumstances and expenses.

Reasons to Keep That Much Money in Your Checking Account

More Liquidity

By keeping this amount in your checking account, you ensure that you have enough liquid funds to cover your everyday expenses. Liquidity refers to how quickly assets can be converted into cash. In this case, the money in your checking account is already in cash form, allowing you to use it instantly, whether for bills, unexpected costs, or leisure activities.

No Overdraft Risk

Another reason to keep a healthy balance in your checking account is to avoid overdraft fees. If you accidentally spend more than you have in your account, you'll likely face an overdraft charge. By keeping a few months' worth of expenses in your account, you're building a cushion that can help prevent these fees.

Enough for Pre-Authorization Holds

Certain transactions, like hotel bookings or car rentals, often place pre-authorization holds on your account. These holds can tie up funds in your account for several days. By maintaining a sufficient balance, you can accommodate these holds without disrupting your normal spending or bill payments.

Is it Possible to Keep Too Much in a Checking Account?

On the flip side, keeping too much money in your checking account can be a missed opportunity. Excess funds could be better used to pay down high-interest debt, invest, or save in high-yield savings or retirement accounts. Remember, money in a checking account typically earns little to no interest unless it's in a high-yield account from FNCB Bank.

The FNCB Bank Wow ME Maximum Earnings High-Yield Personal Checking Account

For those looking for a checking account that offers more, consider the FNCB Bank's Wow ME (Maximum Earnings) High-Yield Personal Checking Account. This account combines the convenience of a regular checking account with the perks of a high-yield account with:

  • Free checking with high interest: The account bears high interest, giving you the opportunity to earn more from your balance.
  • More rewards and convenience: With a range of perks, this account is designed for the modern user.
  • No minimum balance to earn rewards: You earn rewards irrespective of your balance.
  • No monthly maintenance service charge: You won't be penalized with monthly charges for maintaining your account.
  • Free online banking, mobile banking, and telephone banking: Convenient and accessible banking options are available.
  • Free debit card with access to 55,000 surcharge-free ATMs on the Allpoint Network: This offers you freedom from ATM charges and wider accessibility.
  • Send money with Zelle®: This feature provides a quick and easy way to transfer money.

Contact FNCB Bank to Open a Personal Checking Account Today

Striking the right balance in your checking account is the most important first step to efficient money management. It's about finding the sweet spot that allows for liquidity, avoids overdraft risk, provides for pre-authorization holds, and also avoids stagnation of funds. To benefit from an account that offers more, reach out to FNCB Bank to open a Wow ME High-Yield Personal Checking Account. Take control of your finances and give your money the opportunity to grow.

Our Mission: To make your banking experience simple better.

Back to Top