Author Topic: Is it bad that my checking account frequently has close to zero dollars in it?  (Read 3517 times)

EconDiva

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Before you get 'too' too alarmed...let me mention that I'm not overdrafting my account at any time.

It's just simply that once I get paid, I pay all my bills and then transfer money over to several different savings accounts from my checking account.  Since practically every dollar is accounted for, I usually have very close to nothing in my account say, the day before pay day.

I guess I should be keeping a buffer in my checking?  I do check it multiple times a week.  I'm in aggressive savings mode for a house downpayment right now so very little is left in my checking since after bills are paid the rest basically goes into several different savings accounts.

cl_noll

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I'm in the same boat.  As long as you're 100% sure you won't overdraft, I can't see the issue. 

That said, know your Bank's rules. My checking account is with a fee-laden bank with many regressive rules. But, so long as my checks are direct deposited, I won't get penalized for being below $500 (I know, stupid but they have ATM's all over so I put up with it).

mindy

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Our checking accounts are pretty much always at ~$100. I'm with a very good credit union that has an awesome overdraft protection plan, but even so I'm a stickler when it comes to finances so I highly doubt I would ever overdraft my account.  I don't particularly see a reason to have a huge amount in checking, especially if it's a noninterest-bearing account. It's basically just wasting away there.

ditkanate

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I'm in the same boat.  As long as you're 100% sure you won't overdraft, I can't see the issue. 

That said, know your Bank's rules. My checking account is with a fee-laden bank with many regressive rules. But, so long as my checks are direct deposited, I won't get penalized for being below $500 (I know, stupid but they have ATM's all over so I put up with it).

You may already know this, but Schwab's fee free checking accounts refund you for all ATM fees no questions asked.  You don't have to waste even one second thinking about whether an ATM is in the right network or not.  Just throwing that out there. 

As for the OP's original question, as long as your system works for you and you aren't accidentally overdrawing your account, I see no problem at all with your cking account balance being low.

Dezrah

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Most folks around here are not going to be alarmed by this, especially if you have a good track record of not overdrafting.

However, if it makes you feel anxious, bumping it up to a worry-free level is a good use of money.  Let's assume you kept about $500 in it.  At 1% interest in your saving account, you'd miss out on $5 a year.  Whoop-dee-doo.  If that $5/year let's you sleep better at night, then it's money well spent.

tarheeldan

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I did this for years! The good part is it means you have to pay close attention, so it's great when you are establishing mustachian habits.

Now that my habits a pretty set (I spend within my budget without any effort), that benefit is gone and it would be unnecessary stress. So, I have a cash buffer of just $1,000 so that I don't have to worry about the timing of cash flows. I recently also set my credit cards up to auto-pay along a similar line of reasoning.

Laura33

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Most folks around here are not going to be alarmed by this, especially if you have a good track record of not overdrafting.

However, if it makes you feel anxious, bumping it up to a worry-free level is a good use of money.  Let's assume you kept about $500 in it.  At 1% interest in your saving account, you'd miss out on $5 a year.  Whoop-dee-doo.  If that $5/year let's you sleep better at night, then it's money well spent.

This.  If it works for you as-is, awesome!  No reason to change.  OTOH, if it is causing you to fret, figure out if the lost interest is worth your peace of mind.

When DH and I married and set up our first joint account, we didn't always know immediately when the other had written a check -- nothing big, and we always caught up on the Quicken at the weekend, but the size of the bank fees that would result from a mix-up was enough for me to fret about it.  So we significantly increased our minimum balance.  I figure the loss of interest is on the order of a few bucks a year, which is way cheaper than even a single screw-up -- and for 20 years I literally have never worried once about minimum balances, bouncing checks, etc.

khangaroo

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I've been doing this since 2012 and have $50 in my checking account after ever paycheck since every penny is accounted for. I have not over-drafted once *knock on wood*

For further ease of mind, my bank gave me a $750 reserve line tied directly to my checking account so if I happen to fudge on my excel sheet somehow then they would withdraw out of the $750 instead of me getting hit with an overdraft fee. I would just pay off the reserve line like it was any other LOC, however, they start charging interest as soon as the charge hits the books. Luckily, I haven't had to use it.

So if you were looking for some extra protection, see if you can get that reserve line set up so that you can maximize every single dollar! FWIW, I have US Bank.

Retire-Canada

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Before you get 'too' too alarmed...let me mention that I'm not overdrafting my account at any time.

It's just simply that once I get paid, I pay all my bills and then transfer money over to several different savings accounts from my checking account.  Since practically every dollar is accounted for, I usually have very close to nothing in my account say, the day before pay day.

I guess I should be keeping a buffer in my checking?  I do check it multiple times a week.  I'm in aggressive savings mode for a house downpayment right now so very little is left in my checking since after bills are paid the rest basically goes into several different savings accounts.

I pay my bills for the month and then transfer all the remaining money less like $5 to my investments. Most of the time my checking account is empty except for the end of the month and then it only has money for a few hours.

I'm not rich enough to have money sitting around not working for me.

seattlecyclone

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Close to zero is fine. Below zero is not. As long as you know exactly when and how much any charges to that account will be, you can plan for it and make sure the money is only there when it needs to be.

There was a time when I would manage my checking and savings accounts as you describe. However interest rates now don't make this type of micromanagement seem worthwhile to me. To make it work you really need to keep on top of bill due dates, pay days, etc. to make sure that you transfer as much as possible (but not too much) to the savings account at the appointed time, or make reverse transfers when needed. With a 1% difference between checking and savings interest rates, even keeping a $10,000 cushion in your checking account causes you to lose out on $100 per year (minus taxes). That's not nothing, but I find the freedom to just set all of my bills on auto-pay and not worry about the details to be worth at least that much.

Mezzie

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I keep a buffer just in case I make a math error. It helps me feel better. I don't think I've ever dipped into my buffer, so it probably isn't necessary; only you can decide what you're comfortable with.

ShoulderThingThatGoesUp

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What do you do for surprise expenses, like a flat tire or broken water heater?

Retire-Canada

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What do you do for surprise expenses, like a flat tire or broken water heater?

1. credit card
2. high savings rate
3. line of credit
4. big portfolio

I've never made it past #3 and rarely gets past #2.

EconDiva

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What do you do for surprise expenses, like a flat tire or broken water heater?

Those things don't come out of my checking account.

As I mentioned, once I get paid I pay all my bills and transfer money to my savings accounts.

To be more specific, I'm really just transferring all my money for bills to my credit card because all my bills are paid via my credit card. So on pay days I pay off the credit card and also transfer the remainder left to savings accounts.

So an emergency would be paid like everything else is-on my credit card. Then I'd pay it off with money from my checking account. (Or if it was a large expense I'd dip into a savings account to pay it).

I used to pay everything with my checking account funds (debit card) back in the day. But now my checking account basically is just a "funnel" through which my paycheck passes into different other accounts.

merlin7676

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I do the same thing.
After getting paid, I pay my bills (what little I have), expenses like mortgage payment, joint account for groceries/utilities, my investment accounts, my savings account, and I'm usually left with $40 or $50 to last me 2 weeks.
My husband thinks it's crazy that I have such little money in there but as I always tell him I don't need any more than that in there b/c I'm not going to spend that much on other misc purchases.
He on the other hand likes having a buffer so he keeps an extra $1000 in his checking for "extra/emergencies".
If I had a need for emergency money like a medical bill or broken heater or something, well that's what the money in the savings account is for

Sibley

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I'm in the same boat.  As long as you're 100% sure you won't overdraft, I can't see the issue. 

That said, know your Bank's rules. My checking account is with a fee-laden bank with many regressive rules. But, so long as my checks are direct deposited, I won't get penalized for being below $500 (I know, stupid but they have ATM's all over so I put up with it).

sounds like time for a new bank.

BTDretire

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Probably much better than having $15k to $20k as a constant balance for years as I have.

Retire-Canada

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Probably much better than having $15k to $20k as a constant balance for years as I have.

$15K in cash for 10yrs instead of the stock market cost you about $15K.

Syonyk

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If you don't spend too much time on it and don't overdraft, have fun!

I keep about a $5k floor because a lot of things in my area require paying by check, and things like power come straight from checking. Plus some of the better priced grocery stores are debit only. So it's easier to just keep a higher balance in there and. It have to pay close attention or have to move stuff around for my wife if she's shopping at Winco.

Guide2003

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What do you do for surprise expenses, like a flat tire or broken water heater?

1. credit card
2. high savings rate
3. line of credit
4. big portfolio

I've never made it past #3 and rarely gets past #2.

+1
If your savings rate is high enough you pump the brakes on savings for a month and it will cover most acute emergencies. You can withdraw Roth contributions if you already tapped taxable investments and really had to as well. I've never been a fan of large emergency funds, but I think its a function of job security too though...

Retire-Canada

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I've never been a fan of large emergency funds, but I think its a function of job security too though...

I am a consultant with no job security and I don't have any cash as a EF. Just a LOC and a shit ton of investments. I'm not rich enough to have cash sitting around doing nothing for me.

Metric Mouse

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This reminds me of one other poster who is proud of their money always working for them.

MoonLiteNite

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I check daily in all  my accounts, more as a hobby.

If you are worried a bit about overdrafting because you are highly  investing and paying off bills. I suggest you create a buffer amount, say 1,000$ that you pretend is the 0$ mark. That why you dont have to look all the time. Some banks allow you to do overdraft protection and they will pull from your savings with no fee, or maybe a super small fee. That would be another way to avoid having to worry about it and keeping your main account looking pretty.


Fomerly known as something

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I'm in the same boat but sometimes "overdraft" for free from a small attached savings account which is my buffer.  It's not like that savings account gets great rates either but for me psychologically it's better to have less in my checking account.  My overdrafts often happen because I don't pay attention to "that bill" that normally has a pay date the Monday after my paycheck being deposited had a due date the Thursday before my Saturday direct deposit.