Move it somewhere it can earn you money, or leave it where it is

Extra money in checking sits idle. A checking account is built for moving money in and out, not for holding it long-term. If you have more than you need for monthly bills and emergencies, you have three real choices: move it to a savings account where it earns interest, invest it, or keep it in checking if the amount is small enough that the interest loss doesn't matter to you.

The decision depends on how much money you're talking about, when you might need it, and what your bank offers. A few hundred dollars extra probably isn't worth moving. Several thousand dollars sitting untouched for months almost certainly is.

Key Takeaways

  • Money in checking earns little to no interest, while savings accounts and money market accounts typically pay 4% to 5% annually as of 2024.
  • A high-yield savings account at an online bank takes three to five business days to transfer money back to checking, so keep emergency funds accessible but separate.
  • If you need the money within the next year, savings or a money market account makes more sense than stocks or bonds.
  • Some checking accounts charge monthly fees if your balance falls below a minimum, so moving extra money out can actually cost you if it drops your balance too low.

High-yield savings accounts earn real interest on your balance

A high-yield savings account is the simplest move for money you might need within a year or two. Online banks like Marcus, Ally, and American Express Personal Savings currently pay around 4% to 5% annual interest, though this rate changes with the Federal Reserve. A traditional bank savings account at the same institution as your checking typically pays 0.01% or less.

The catch is access. Transferring money from a high-yield savings account back to your checking account takes three to five business days through an ACH transfer. If you need cash when ready, you can't get it from a high-yield account the same day. That's why this works best for money you know you won't touch for at least a few weeks.

You can open a high-yield savings account at a different bank from your checking account. Many people do this intentionally—the separation makes it harder to spend the money on impulse. You'll need your checking account number and routing number to set up the transfer, and you'll receive a routing number for the savings account so money can flow back when you need it.

Money market accounts offer slightly lower rates but faster access

A money market account sits between a savings account and a checking account. It typically pays interest (usually 4% to 4.5% as of 2024), and it comes with a debit card or checkbook so you can access your money faster than a savings account. Some money market accounts let you write checks or make transfers when ready, though a few still have the three-to-five-day transfer window.

The tradeoff is that money market accounts sometimes require a higher minimum balance to open—often $2,500 to $10,000—and may charge monthly fees if your balance drops below that minimum. Check the specific account terms before opening one. If you have $5,000 or more sitting in checking and you want to keep it somewhat accessible, a money market account can work well.

Keep enough in checking to cover your actual spending pattern

Before you move money out, figure out how much you actually need in checking. Look at your last three months of transactions. Add up all your regular expenses—rent or mortgage, utilities, groceries, insurance, subscriptions, gas. Then add a buffer for irregular expenses like car repairs or medical bills.

Many people keep one to two months of expenses in checking and move everything else. If your monthly spending is $3,000, keeping $6,000 in checking gives you a two-month cushion. Anything beyond that is extra.

One warning: some checking accounts charge a monthly maintenance fee if your balance falls below a minimum—often $500 to $1,500. If moving money out would drop you below that minimum, you might pay $10 to $15 a month in fees, which wipes out any interest you'd earn elsewhere. Check your account agreement or call your bank to confirm whether a minimum balance applies to your account.

Certificates of deposit lock money away for a may provide rate

A certificate of deposit (CD) is a time-locked savings product. You give the bank a sum of money for a set period—three months, six months, one year, five years—and the bank pays you a fixed interest rate. CD rates are currently 4% to 5.5% depending on the term length, and they're may provide by the FDIC up to $250,000.

The catch is that you can't touch the money without a penalty. If you withdraw early, you lose some or all of the interest you've earned. A six-month CD might charge three months of interest as a penalty for early withdrawal. This makes CDs useful only for money you genuinely won't need for the full term.

CDs make sense if you have a specific goal with a timeline—saving for a down payment in two years, or setting aside money for a known expense. They don't make sense for emergency funds or money you might need sooner.

Investing in stocks or bonds is for money you won't need for years

If you have extra money and a time horizon of five years or longer, a brokerage account or retirement account might make sense. Stock market returns average around 10% annually over long periods, but they fluctuate year to year. In some years you'll lose money. That's why you should only invest money you won't need for at least five years.

For money you might need in one to five years, stocks are too risky. A market downturn could force you to sell at a loss. Bonds and bond funds are less volatile than stocks but still fluctuate. Stick with savings accounts or CDs for money with a shorter timeline.

If you do open a brokerage account, you'll need to fund it from your checking account. The transfer usually takes one to three business days. Selling investments and moving the money back to checking takes another one to three days, so this isn't a place for emergency money.

Automate the move so you don't have to think about it

Once you've decided where the extra money should go, set up an automatic transfer. Most banks let you schedule a recurring transfer from checking to savings on a specific day each month. If you get paid on the 1st and you know you'll spend $3,000 by the 25th, you could set up a transfer on the 26th to move anything above $6,000 into savings automatically.

This removes the decision-making. Money moves without you having to log in and do it manually. You're less likely to spend it on impulse if it's not sitting in your checking account.

Some employers let you split your direct deposit between two accounts. If your paycheck is $4,000 and you want $3,000 in checking and $1,000 in savings, you can set that up through your payroll system. The money lands in each account automatically, and you never see it in checking to be tempted to spend it.

Frequently Asked Questions

How much extra money should I keep in checking before moving it?

Keep enough to cover one to two months of your regular expenses, plus a small buffer for unexpected costs. If you spend $3,000 a month, $6,000 to $7,000 in checking is reasonable. Anything beyond that is genuinely extra and earning you nothing.

Will moving money to savings affect my credit score?

No. Moving money between your own accounts doesn't show up on your credit report. Your credit score is based on borrowing and repayment history, not on how much cash you hold or where you hold it.

Can I move money back from savings to checking if I need it?

Yes, but it takes three to five business days through a standard ACH transfer. Some banks offer faster options like same-day transfers or transfers through their mobile app, but the default is three to five days. Plan ahead if you know you'll need the money.

What if my bank doesn't offer a high-yield savings account?

You can open a savings account at a different bank. Many online banks let you open accounts without visiting a branch. You'll link your checking account at your current bank to the new savings account, and transfers between them take three to five days.

Is it bad to keep a large balance in checking?

It's not bad, but it costs you money in lost interest. If you have $10,000 in checking earning 0.01% and you moved it to a savings account earning 4.5%, you'd earn roughly $450 a year instead of $1. The tradeoff is convenience—checking gives you when ready access.