I’m a Bank Teller: 7 Reasons You Shouldn’t Keep More Than $3,000 in a Checking Account

YinYang / Getty Images

YinYang / Getty Images

Many people simply leave a large chunk of money in their checking accounts and let it sit there. But is that the best move? Probably not. GOBankingRates spoke to Rachael P., a seasoned bank teller who had seen it all when it came to customers’ banking habits. She knew firsthand the pitfalls of keeping too much money in a checking account and was always ready to offer tough financial advice when needed.

Here are the seven reasons why a bank teller advised against keeping more than $3,000 in a checking account.

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No Interest Earned on Larger Balances

The number one reason Rachael disliked seeing huge balances in checking accounts was the complete lack of interest earned. “Why would you keep $10,000 just sitting there doing nothing?” she asked. Checking accounts are meant for money that will be spent in the short term, not for larger sums that could be earning interest elsewhere.

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Easier Access Makes Frivolous Spending More Likely

Rachael had noticed a clear correlation between the size of a customer’s checking account balance and the amount of frivolous spending they do. “It’s like having a milkshake in front of you 24/7 — you’re going to keep taking sips whether you need them or not,” she said. Separating out larger sums makes it psychologically harder to dip into funds earmarked for other purposes.

You Lose Out on Opening Bonuses

Many banks offer lucrative bonuses of $200 or more just for opening new checking or savings accounts and maintaining a minimum balance. But if you already have a large checking account balance, you miss out on the ability to cash in on these deals. “Why leave money on the table?” Rachael asked. “That bonus could go right into investments.”

Your Money Isn’t as Safe as You Think

For all the security surrounding banks, a checking account balance only has $250,000 of FDIC insurance if the bank fails. Any amount over that is not protected. By keeping an excessively large sum in a checking account, customers were needlessly putting their money at risk. “Write that number down and decide if it’s worth it,” Rachael said.

No Opportunity for Compounding

“The miracle of compounding only works if your money is actually invested and earning returns,” Rachael shared. By leaving large amounts of money in checking accounts, many people were depriving themselves of decades of potential growth. Even a simple high-yield savings account could earn a customer hundreds — if not thousands — more per year than a standard checking account.

It Can Impact Mortgage, Car Loans and Other Approvals

During the underwriting process, banks and lenders look askance at excessive funds sitting in checking accounts, explained Rachael. They want to see a clear delineation between assets, investments and funds marked for down payments or reserves. “If they see $50,000 in your checking account, they’re going to wonder if that money should have been dedicated elsewhere in your finances.”

You Could Become a Target for Fraud

“As sad as it is, sometimes having a fat checking account balance makes you a bull’s eye for scammers both inside and outside the bank,” said Rachael. She had seen professional scammers becoming quite skilled at studying account balances and crafting ways to siphon off large chunks illicitly. While no sum makes you 100% safe, smaller balances tend to fly under the radar more easily.

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This article originally appeared on GOBankingRates.com: I’m a Bank Teller: 7 Reasons You Shouldn’t Keep More Than $3,000 in a Checking Account

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