Are You A Checking Account Moron?


In a recent post on personal finance blog Get Rich Slowly, guest writer Robert Brokamp asked readers where their “financial comfort level” rates. He looked over discarded ATM receipts and was shocked by how many people have balances of, say, $54 or $72… And that these folks willingly pay a $3 ATM withdrawal fee, not to mention the $2 or more that the individual’s own bank will assess (at least that’s what Bank of America does to me—maybe they aren’t a fan of their recent coverage here).

Paying $5 for a $40 cash withdrawal from your checking account means you are paying a 12.5% fee for the privilege of accessing your own money. Really? Please don’t be that dumb with your cash. It’s bad for America (I guess), and it’s certainly bad for you.

Use an ATM machine that is in-network so you won’t have to pay any fees. If your bank has a weak network of ATMs, or does not provide ATM fee reimbursement, you need to find a better bank.

Similar to Brokamp’s receipt findings, I am shocked by the occasional leftover ATM receipt I’ll come across at my bank. I saw one recently that was in excess of $300,000. Now, either I stumbled across an ATM receipt left behind by Bill Gates, or this person is not appropriating their finances very well… or leaves behind receipts purely to make me jealous. Regardless of the reason, 300 large is way too much to have in a non-interest bearing, or extremely low interest, checking account. You should have most of that money in, at the very least, a money-market fund or a CD. Better yet, invest it in a solid exchange-traded fund or two. Just don’t let all that money go to waste, when it could be out there in the market earning for you. Getting a good interest rate on your savings account can also make a big difference. To check out how much more you could be saving, go to the BankingMyWay Savings Calculator.

I asked personal finance guru and bestselling author Ramit Sethi about the folly of checking account morons. How much should a responsible person have in his or her primary checking account? “If you have $50 in your checking account, you’re at risk of getting hit with overdraft fees if you pay a bill late. But anything more than 3 months' of living expenses should be put to work outside your checking account -- either in a savings account or an investment account like your 401(k) or Roth IRA,” he explained.

So there you have it—from an expert. Once your checking account has three months of living expenses in it, find a better use for your leftover cash. Or give it to me.

To figure out how long it would take you to achieve your savings goal, check out this handy calculator.

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