How much cushion do you leave in your checking account

[jazz4cash]

You don't.  He misspoke by saying it was a money market account.  It's called a Demand Note and it's not FDIC insured, thus the extra basis points to compensate.

Basically, retire@40 is correct..not sure what technically qualifies as a MM, but the important thing is no FDIC, so not a place to park too much. It IS a real nice account managed by Mellon Bank

 

[Alex]

I have at least 10K extra at all times in the checking- but no more than 15K.

 

[d]

I have at least 10K extra at all times in the checking- but no more than 15K.

wow, that seems like alot. why so much? i'd be interested in knowing why, and assume others would too.

 

[audreyh1]

I have at least 10K extra at all times in the checking- but no more than 15K.

If you have that much "extra" I hope you're getting a decent interest rate on that balance.  I have a lot in cash, but I don't keep it in my checking account.

Audrey

 

[TromboneAl]

If your 10K checking account is paying 1% interest or less, your cushion is costing you $400 a year, or $4,000+ per decade.

 

[mickeyd]

After I reconcile it each month, I transfer all but $1000 to my MMF. Each month starts out with a grand, but if I have an expense that is greater than that, I just write a check from my MMF and move on. I rarely have to dip into my MMF so this $1000 seems to be a workable starting balance each month before we add/subtract all of the regular stuff.

 

[kat]

I keep $250 and change in my checking account, the minimum for no fees, and about $1,000 in a statement savings at the same bank. I only use the checking account for bills that have to be paid by check and are too small to write a check from a Vanguard account. (eg. dues for the hiking club I belong to). All my regular bills that are paid electronically are handled through my statement savings. I transfer regularly between Vanguard and the bank depending on how much in flow or out flow.

 

[MJ]

With today's ability to easily move money via ach, I don't see why one would keep more than $500 to $1000 cushion unless you are travelling overseas and are concerned about not having access to your virtual bank through the internet.

 

[IHateCNBC]

I keep it between $1 and $2. The rest I have in higher interest accounts.

I pay everything I can via credit card - because I get 2% cash back.

All and all - interest rates for someone trying to live off fixed income - is not good.

 

[Alex]

wow, that seems like alot. why so much? i'd be interested in knowing why, and assume others would too.

Because by keeping a 10K balance I get free checking for all my accounts and it pays me interest. Also, my DW likes to have emergency cash available, just in case.

 

[Nords]

Because by keeping a 10K balance I get free checking for all my accounts and it pays me interest. Also, my DW likes to have emergency cash available, just in case. 

Yes, but would you earn more from a money-market account paying 4-5% interest, even after paying for the checking account?

Or would you earn more money from a credit union that doesn't charge for checking accounts?

Ah, "the available emergency cash"-- never mind, the comfort factor trumps the financial issues.

 

[AltaRed]

I start the month with a sum of money in the CA that I think I need to feed the ATM machine and pay all of our bills that are auto-debited, plus about $1k cushion. I have no desire to cut it close nor to monitor our CA balances frequently during the month.

Our primary credit card is also an auto debit from our CA, but I look at outstanding balance that needs to be paid at end of the month (as it can vary quite a bit) and transfer enough from our online ISA to the CA to pay for that.

Every now and then, I may need to tap into the ISA during the month to pay, for example quarterly installments on income tax, or to cover an unexpected plumber repair at home.

 

[Alex]

Ah, "the available emergency cash"-- never mind, the comfort factor trumps the financial issues.

you hit the nail on the head there. My DW wants it and I say, 'yes dear'. We've been happily married for 15 yrs

 

[jclarksnakes]

DW's paycheck and my military pension go into her checking account from which all the bills are paid. The CC bill is the only one that ever regularly amounts to much. When we get too much in checking it goes to the savings/investments. My paycheck and cash and checks from sales of snakes goes into my MM account. My MM account doubles as my mad money account but also we have to move cash out of there into savings/investments fairly often. We often have over 10K in the checking and over 15K in the MM just as readily available quick cash. Financially not so smart but it is nice to never have to worry about getting cash quick. I have never used an ATM. Always have a stack of cash (I know, not earning interest) in the gun and knife safe. This is the really QUICK emergency cash fund. The ladies at the bank know me and that makes my old time banking habits seem not quite so dumb. BTW, 401K and 403B money comes out of the paychecks before we ever see them. ALWAYS pay yourself first.
Life is good!
jc

 

[BigMoneyJim]

Has anyone "abandoned" their local bank ?

Only reason I have a local bank account is for no-fee ATM access around town. I never go to the bank.

I've done without a local bank for quite a while. I'm with a credit union that has shared ATMs I can look up online, but it still costs .50 per withdrawal. However I can get cash back at a grocery store or WM for no fee when paying by debit card. I also just recently learned my CU participates in shared branching, so a few local credit unions will accept transactions--with certain daily limits and deposit wait periods--so on the very rare occasion I'd like a branch I now have a local option where before I worried about banking by mail. I was happy to deposit several small refund checks in person instead of by mail. (I moved and had several little refund checks from the phone company, electric company, apartment, etc..)

As far as the original topic about a cushion, I've generally had money automatically go to savings and/or debt reduction and had a roughly budgeted amount go into checking. I usually spent less than what goes into checking so would occasionally sweep a chunk from checking into savings. At times when I ran over the monthly budget (trip, wisdom teeth removal, etc.) I have a few times taken a chunk from cash savings to cover for the month; other times the CC let me catch up the following month with no interest paid. So given my spending habits I really didn't have a target cushion. I generally just had to be sure enough was there to cover scheduled debits.

 

[Scrooge]

I too have over $10K in my checking account, but for a very different reason. I am a roaming consultant and when my roaming takes me out of state, which happens about 50% of the time, my monthly expenses can be quite high. Of course, the client eventually reimburses me -- and I even break even when I get that $300 check from CC cash back at the end of the year -- but in the meantime I have to pay the CC bill from my own funds.

Hm, now that I am thinking about it, I should probably link the CC to my HSBC or EmigrantDirect accounts and keep $10K there instead of my local bank. The latter's interest rates are, er, not exactly competitive. Let me check if HSBC/ED offer this service...