Everyone’s Minimum Is Different

There is no one-size-fits-all minimum balance that everyone should keep in their checking accounts.

“The actual minimum amount will vary depending on the individual’s financial situation and goals,” said Dennis Shirshikov, adjunct professor of finance and economics at the City University of New York and strategist at Awning.com.

“To calculate your own minimum, you’ll need to consider your monthly expenses and your income,” he said. “Start by creating a budget to get a clear picture of your monthly expenses, including things like rent, utilities, groceries and debt payments. Then, subtract your expenses from your income to see how much money you have left over each month. The amount of money you have left over after paying your expenses is a good starting point for your minimum checking account balance.”

You should especially be mindful of monthly expenses that get withdrawn automatically from your checking account, said Armine Alajian, CPA and founder of the Alajian Group.

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“If you have monthly subscriptions, automatic payments for utility bills, etc., calculate the total amount you spend each month on those and be sure to keep your account balance at or above that number,” she said. “Remember that some of these bills will fluctuate month to month, so calculate an average for those bills and use that as an estimate for how much to keep in your account. It’s always best to overestimate than to fall short.”

It’s a Good Idea To Have a Cushion

Remember that the number you calculate based on your needs is the absolute minimum to keep in your account — it’s probably a good idea to keep a bit more.

“Keep a cushion of at least a few hundred dollars in your checking account to cover unexpected expenses or emergencies,” Shirshikov said. “This will help you avoid overdraft fees and other financial problems if you encounter an unexpected expense or if your income is delayed for any reason.”

As a rule of thumb, Gary Golden, CEO of BHCU, recommends keeping a cushion of 20% of what you’ve calculated to be your minimum balance.

“Keeping a month’s worth of expenses, plus a little extra so that you can avoid overdraft charges if you make any mistakes, will ensure timely payments of your monthly bills,” he said.

Keep Enough in Your Account To Avoid Fees

Your bank may have additional minimum balance requirements that you need to be mindful of.

“Depending on your bank, you may be required to have a minimum daily balance in your checking account to avoid fees or account closure,” Alajian said. “As long as you keep the minimum in your account by the end of each business day, you’ll be in good standing with your bank. However, I advise clients to also keep more than just the minimum in their account to avoid overdrafts. If you overdraft your account, you could face a fee, depending on your bank’s policies.”

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