Many people just leave a large portion of money in their checking account and let it sit there. But is that the best way? Probably not.
GOBankingRates spoke with Rachael P., a veteran banker who has seen it all when it comes to customers’ banking habits.
Warning: I made $10,000 with one of Dave Ramsey’s best passive income ideas
Discover more: 6 money moves you need to make if you want to be like the rich
She knew firsthand the pitfalls of having too much money in a checking account and was always ready to offer tough financial advice when needed.
Here are seven reasons why one banker advises against leaving more than $3,000 in a checking account.
Protect your assets: The smartest ways to protect your money.
No interest on larger balances
The main reason Rachael didn’t like seeing huge balances in her checking accounts was the complete lack of interest. “Why would you just leave $10,000 sitting there unused?” she asked.
Current accounts are intended for short-term money and not for larger sums that could earn interest elsewhere.
Find out: 4 ways the middle class can earn an extra $500 a week from home
Easier access makes reckless spending more likely
Rachael noticed that there was a clear connection between the size of a customer’s account balance and the amount of unnecessary spending they made.
“It’s like having a milkshake in front of you 24/7 – you’ll keep taking sips whether you need them or not,” she said.
By separating out larger sums of money, it becomes psychologically more difficult to access funds intended for other purposes.
You lose opening bonuses
Many banks offer lucrative bonuses of $200 or more just for opening new checking or savings accounts and maintaining a minimum balance.
However, if you already have a high balance in your current account, you will miss out on the opportunity to benefit from these offers.
“Why leave money on the table?” asked Rachael. “That bonus could go directly into investments.”
Your money is not as safe as you think
Despite all the security measures that banks offer, a checking account is only insured by the FDIC for $250,000 in the event of the bank’s insolvency. Amounts above this are not protected.
By depositing too much money into a current account, customers were unnecessarily exposing their money to risk.
“Write down the number and decide if it’s worth it,” Rachael said.
No possibility of interest
“The miracle of compound interest only works when your money is actually invested and generating returns,” Rachael explained.
By leaving large amounts of money in checking accounts, many people deprived themselves of decades of growth potential.
Even a simple high-interest savings account could earn a customer hundreds – if not thousands – more per year than a regular checking account.
It can affect mortgages, car loans and other approvals
During the underwriting process, banks and lenders look at excessive amounts in checking accounts with suspicion, Rachael explains.
They want a clear distinction between assets, investments and funds earmarked for down payments or reserves.
“When they see $50,000 in your checking account, they’re going to wonder if that money would have been better spent elsewhere in your finances.”
You could become a target of fraud
“As sad as it is, sometimes having a high balance makes you a target for fraudsters inside and outside the bank,” Rachael said.
She had seen professional fraudsters become quite adept at examining account balances and finding ways to illicitly divert large amounts of money.
Although no amount will protect you 100%, smaller amounts are easier to go unnoticed.
More from GOBankingRates
This article originally appeared on GOBankingRates.com: I’m a bank teller: 7 reasons you shouldn’t have more than $3,000 in a checking account