Image source: The Motley Fool/Upsplash
Of all the financial problems that life can throw at you, having a cash-stuffed checking account isn't the worst one to encounter. On a scale of "I don't know what to do with my unlimited PTO" and "the wifi doesn't reach the farthest end of our pool," this problem might fall somewhere in the middle.
Even if it's not particularly severe, a bloated checking account isn't ideal. Not only can it keep you from earning more interest elsewhere, but it could also lead you to spend money instead of saving it.
It's not always easy to know how much is too much in your checking account. If the following three signs resonate, it might be time to open a high-yield savings account .
1. You have more than a few months' worth of expenses
Of all the different bank products, checking accounts typically offer the best access to your money. Debit or ATM cards, check-writing privileges, and branch availability make your cash widely accessible. This ready access to your cash makes checking accounts good for emergencies, especially if other cash is tied up in less-accessible accounts, like CDs.
At the same time, you don't want to keep too much emergency cash in your account, even if it's there to cover the unexpected. One to two months' worth should be sufficient, especially if you're also storing cash in a savings account.
I keep at least one months' worth of emergency expenses in my checking account. I do this so I never have to worry about having sufficient cash to meet that months' expenses, thereby helping me avoid overdrafting. I have a bigger emergency fund that's connected to my account and that I can tap anytime.
Depending on your situation, you might want to keep more than one month, but I wouldn't go over two months' worth. At that point, you're losing money on interest that could be earned in high-yield savings accounts.
2. You're not expecting a big expense soon
Some people use checking accounts to stash money for big expenses that they're expecting. They know, for instance, that they're going to spend $5,000 for a home remodeling project. Since they know they're going to spend this money, they just keep it in their checking account until they pay the contractor.
Using your checking account to prepare for big purchases is fine, if it helps you stay focused. But if you're not making the purchase within a few months, a savings account would be the better option. Because interest rates on checking accounts are typically low, a savings account would help you hit your goal faster. You can always use a credit card for the purchase, then move money from your savings into your checking account to pay for it.
3. You don't have retirement accounts
If your checking account is swollen with cash, and you don't have a retirement account, that's a good sign it's a bit bloated.
Checking accounts aren't the best place to keep money for long-term purposes. They might offer the most convenience, but they don't have the best interest rates, nor do they offer growth that outpaces inflation. By stashing lots of cash in your checking account, you're missing out on better growth opportunities in your IRA or 401(k).
If you believe your checking account is overfunded, check out some high-yield savings accounts to balance it out. Keeping some cash in your checking account isn't a bad thing, but be sure to balance that stability and money access with growth in other places.
Alert: highest cash back card we've seen now has 0% intro APR until nearly 2026
This credit card is not just good – it's so exceptional that our experts use it personally. It features a 0% intro APR for 15 months, a cash back rate of up to 5%, and all somehow for no annual fee!
Click here to read our full review for free and apply in just 2 minutes.
We're firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers. The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy .
Local News
