How much money should I keep in my checking account?

A checking account is a central part of many people’s personal finances. Paychecks and direct deposits often flow into the account, while everyday spending and bill payments flow out.

Sound familiar? If so, it wouldn’t be surprising if you’ve asked yourself, “How much money should I keep in my checking account?”

Well, the answer can be different depending on your circumstances. “Every time I get paid, I look at the bills I have coming up before my next paycheck and make sure I have enough in checking to cover those bills,” says Ben Luthi, a personal finance writer.

Along with the amount you need to pay your bills and everyday purchases, you may have other reasons to keep some money in your checking account. Luthi says having a buffer in his checking account helps him cover unexpected expenses.

But how much money should I keep in my checking account, you might be asking. While the exact amount will differ from person to person, here are a few things to consider:

How much money should you keep in your checking account? To determine your ideal checking account balance, you may want to start by making a list of your monthly bill payments and other debits that are linked to the account. For example: automatic transfers to savings. With Capital One Recurring Transfers, you can grow your savings automatically by scheduling recurring transfers that fit your specific budget and timeline. This will help you determine the bare minimum you’ll need in your account.

Some of these bills can be higher or lower from one month to the next. “You can figure out your variable expenses by staying on top of your finances with a budget or using an app to track your spending,” says Ryan Inman, a financial planner for physicians.

If you haven’t been consistently tracking your spending, review your account statements or bills to estimate your average monthly expenses. This can give you a clearer picture of how much money you typically need in your checking account. You can use that figure as a starting point if you’re asking, “How much money should I keep in my checking account?”

Inman says to estimate your average monthly expenses for utility bills and other seasonal payments. Add up your total annual costs and divide that amount by 12 to determine how much to set aside each month.

He also suggests setting aside a little money each month for large expenses that come up a few times a year, like car or home insurance bills, and keeping that money in either a checking or savings account.

If you use your checking account for your everyday purchases—groceries, gas, going out—you’ll want to add the sum of these amounts to your monthly bill payments and withdrawals to answer the question, “How much money should I keep in my checking account?”

Since your everyday spending likely goes up and down, you could review the previous few months’ expenses. You can also start tracking your purchases to see where your money goes. “The longer you track your finances, the better you can figure out your average costs,” Inman says.

Using those averages (and aiming for the high end of the range) is a useful way to determine how much you tend to spend outside of regular bills and need to set aside in your checking account.

One reason to always keep at least $100 in your checking account, or even a little more than you think you need, is to help avoid overdrawing your account.

If you don’t have overdraft protection, an automatic bill payment or debit could bring your balance below zero. This could result in an insufficient funds fee from your bank.

“I always keep a buffer of a few hundred dollars in my checking account,” Luthi says. “If I forget about an upcoming bill, or need to send someone money or withdraw cash, I don’t have to worry about overdrawing my account.”

While $100 might not be enough to cover major bills, it can help you avoid overdrawing your account due to a small monthly bill that you might forget about. Say, a streaming service or a subscription to a meal delivery program.

Does your checking account charge overdraft fees? Capital One 360 Checking doesn’t, helping you hold on to more of your money.

Some checking accounts may charge a monthly maintenance fee if you don’t maintain a minimum balance. If you’re wondering, “Should I keep extra money in a checking account?” the answer is likely yes, especially if the additional funds will help you avoid fees.

However, switching to a checking account without a monthly maintenance fee or balance requirement might be a better option. It can help you manage your checking account while potentially saving money. Capital One 360 Checking accounts are fee-free: Add in no minimum balance requirements and you have more money in your wallet.

If you have enough money in your checking account to cover your bills and everyday expenses, you may have another question. Should you keep extra money in a checking account or move those funds elsewhere?

Some checking accounts pay interest. In that case it may make sense to keep your money in the account. But moving extra money to a savings account could also be a good idea. Savings accounts typically offer a higher interest rate than checking accounts.

“I have multiple savings accounts, each set aside for a different goal,” Luthi says. “Separating them into different goals makes it easier to know where I stand with each.”

Keeping your savings separate from your daily spending money can make it easier to avoid spending it. Plus, your savings may have the opportunity to grow over time through compound interest. This is when you earn interest on both your original balance and the interest you’ve already earned, so your money builds on itself.

Figuring out the answer to the question “How much money should I keep in my checking account?” is a great first step. Growing your checking account to that point is the next step. Once you’ve reached these goals, set calendar reminders to review your account balance. Then, update the amount you keep in your checking account as your needs change.

The amount of money you should keep in your checking account depends on your expenses, spending habits and financial goals. Reviewing your account regularly can help you maintain a balance that works for you. It can also help you make sure your money is working toward your bigger financial goals.

The simple answer to the question, “How much should I keep in my checking account?” is:

• Keep enough money in your checking account to cover upcoming bills and automatic payments. Make sure you also factor in everyday purchases and other regular expenses.

• Maintain a buffer to help handle unexpected expenses and reduce the risk of overdrafts or declined transactions. 

• Move extra money to savings or other accounts when appropriate to help it grow and support your longer-term goals.

As you’re deciding how to manage your money, you’ll want options. The Capital One Mobile app helps you make the most of your money.