Is $5,000 Too Much to Keep in Your Checking Account?

Checking accounts serve one big purpose: To mediate between your source of income (aka, your paycheck) and other financial destinations, like paying bills, making purchases, or contributing to your savings. They're not great places to store long-term savings, especially money earmarked for retirement, as they don't have competitive interest rates or tax benefits.

That said, it's OK to leave some money in your checking account, even if you don't have an immediate plan for it. For example, you might want to leave a months' worth of expenses in your checking account as a rainy day fund.

But what about $5,000? Is $5,000 too much to leave in your checking account? Let's take a look.

When it's OK to leave $5,000 in your checking account

First off, it's important to reemphasize that checking accounts are transactional. They exist so you can draw money against your balance. This separates them from savings accounts and retirement accounts, which are better suited for long-term savings, because they offer better returns and sometimes tax benefits.

Our Picks for the Best High-Yield Savings Accounts of 2024

Product	APY	Min. to Earn
American Express® High Yield Savings Member FDIC. APY 3.80% Rate info 3.80% annual percentage yield as of December 28, 2024. Terms apply. Min. to earn $0 Open Account for American Express® High Yield Savings On American Express's Secure Website. Member FDIC.	3.80% Rate info 3.80% annual percentage yield as of December 28, 2024. Terms apply.	$0	Open Account for American Express® High Yield Savings On American Express's Secure Website.
Capital One 360 Performance Savings Member FDIC. APY 3.80% Rate info See Capital One website for most up-to-date rates. Advertised Annual Percentage Yield (APY) is variable and accurate as of Dec. 6, 2024. Rates are subject to change at any time before or after account opening. Min. to earn $0 Open Account for Capital One 360 Performance Savings On Capital One's Secure Website. Member FDIC.	3.80% Rate info See Capital One website for most up-to-date rates. Advertised Annual Percentage Yield (APY) is variable and accurate as of Dec. 6, 2024. Rates are subject to change at any time before or after account opening.	$0	Open Account for Capital One 360 Performance Savings On Capital One's Secure Website.
Western Alliance Bank High-Yield Savings Premier Member FDIC. APY 4.46% Rate info The annual percentage yield (APY) is accurate as of November 7, 2024 and subject to change at the Bank’s discretion. Refer to product’s website for latest APY rate. Minimum deposit required to open an account is $500 and a minimum balance of $0.01 is required to earn the advertised APY. Min. to earn $500 to open, $0.01 for max APY Open Account for Western Alliance Bank High-Yield Savings Premier On Western Alliance Bank's Secure Website. Member FDIC.	4.46% Rate info The annual percentage yield (APY) is accurate as of November 7, 2024 and subject to change at the Bank’s discretion. Refer to product’s website for latest APY rate. Minimum deposit required to open an account is $500 and a minimum balance of $0.01 is required to earn the advertised APY.	$500 to open, $0.01 for max APY	Open Account for Western Alliance Bank High-Yield Savings Premier On Western Alliance Bank's Secure Website.

But you might leave $5,000 in your checking account for a couple reasons. The first is that the money is a part of your emergency fund. If $5,000 covers one to two months' worth of expenses, then it could be wise to keep it in an account that's easy to withdraw from. Since many checking accounts come with debit cards and checks, they could increase accessibility in a time when you need money fast.

Likewise, you might be keeping this money for a large purchase. If you don't use credit cards or prefer debit cards, then keeping $5,000 could prepare you for the expense. If so, that's totally fine. Again, checking accounts work best for short-term purposes. A big purchase, as a short-term purpose, would warrant keeping money in your checking account, especially to avoid overdraft fees.

Keeping $5,000 in your checking account could lead to missed opportunities

It's OK to leave some money in your checking account to cover your bases. However, if you have an emergency fund of three to six months' worth of expenses, and you're also keeping $5,000 in a separate checking account, then you might be missing out on better opportunities, like in the stock market.

Again, checking accounts are transactional. They won't grow your $5,000 over long periods. That money could even lose value due to inflation, especially if your checking account doesn't earn any interest.

If you've covered your bases and have $5,000 left over, you might want to capture high interest rates while you still have a chance. For instance, the best CDs let you lock in an interest rate and have better returns than checking accounts.

Putting $5,000 in a 5-year CD with a 4.00% APY would yield more than $1,000 at the end of its term. It won't make you rich, but it's a lot better than earning next to nothing on a paltry interest rate like 0.01%.

All in all, if you're storing cash in a checking account for long-term purposes, it might be wise to move it. At the very least, you could open a high-yield savings account. That way, you can still access your money when you need it but earn some interest on it before you do.