Here’s Why I Keep an Extra $1,000 in My Bank Account

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I don’t want to get hit with overdraft fees, so I always keep an extra $1,000 in my checking account. Find out more. 

I don’t keep too much money in my checking account. In fact, the only money that’s in there are funds that are going to be used for upcoming purchases or bill payments. Most of my money is diverted out of the account soon after it’s deposited, moving into either a high-yield savings account or a brokerage account where it can be saved or invested.

I do, however, keep an extra $1,000 in the account. And there’s a very good reason why I always have that money sitting even though it’s not earning interest and not meant to be spent.

My $1,000 serves as protection against overdrafts or bounced checks

The reason that I keep $1,000 in my checking account is because I want to have a cushion in case I make a mistake with keeping my checkbook balanced.

I do not want to accidentally overdraft my bank account because I think I have more money in it than I actually do. My bank does not charge an overdraft fee if I spend more money than I have available to me. It offers overdraft protection in the form of a transfer from a savings account, but I don’t have a linked savings account because I prefer to keep my savings in a separate bank.

Instead, I’m eligible for its CoverDraft Service, which offers up to $250 in relief. However, I could still end up with a negative balance and be scrambling to bring the balance up in the 14 days I’m allotted. I don’t want to find myself in this situation, so I’d rather be sure I have extra money in there in case I miscalculate my available balance.

Even more importantly, I don’t want to bounce a check, which could lead to the recipient of the bounced check charging me. And since both my husband and I write checks out of the account and people don’t always cash them right away, it’s harder to keep track of when I might be at risk of this happening.

With an extra $1,000 in the account, we’d have to misjudge our balance and spending by a lot — or have a whole bunch of checks go uncashed that we forget about — before we end up with a negative balance and a risk of fees. It’s much less likely this is going to happen than if we kept less in our account and even a small overlooked purchase sent us into negative territory.

Keeping a cushion in your bank account can help you avoid a world of hassle

If you can keep a cushion in your bank account, you can reduce or eliminate the chances of problems caused by having insufficient funds for a transaction or for a check to clear. We’ve chosen $1,000 to make sure we’ve eliminated the chance of an issue entirely, but even a smaller amount — like $250 or $500 — could go a long way toward saving you from unpleasant surprises.

If you don’t already have this extra money in your checking account, consider trying to build up to it. This way, you can have the peace of mind of knowing you’re not likely to end up with a negative bank balance and the fees that can go along with it.

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