Checking accounts, also known as deposit accounts or transaction accounts, are bank accounts used to manage daily finances. The average checking account balance can vary quite a bit depending on several factors that we’ll cover in this article.
We will also look at what to consider when determining the account balance you might like to keep compared to statistics from the U.S. Federal Reserve.
How to Calculate the Average Checking Account Balance
Average account balance may refer to one of two things:
- The average balance of one person’s account over several days, or
- The average of many people’s account balance
To get one person’s average balance, you need to decide on the unit of time that we want to measure the balance over and the period. In most scenarios, the average account balance is measured daily over one month.
To keep things uniform, you would also need to decide which point in the day you will take the measurement. Usually, this is taken as the beginning of the day. Using this methodology, if we measured the daily balance of someone’s account balance, we would end up with the average daily balance.
Next, add up all of the readings taken over a monthly period, then divide by the number of days in that one month. The result will tell us how much money that account had, on average, during that month. With enough data, you can add all of the daily average balances for an entire year and divide it by 12 to get the average monthly balance for an entire year.
We can yet go a step further by getting everyone’s average account balance, adding them up, and dividing it by the number of people. The number will tell us how much money a group of people has on average. This methodology allows us to get super creative by getting specific peoples’ data, averaging those out, and then comparing them with another group’s data. This little exercise is called segmenting. We can segment by race, household income, age, education, and many other factors.
Average vs. Mean vs. Median
You’ll see the words average, mean, and median thrown around a lot when looking at banking statistics. As such, it’s worth taking an extra minute or two to explain the difference between these terms fully. Understanding this will allow us to understand what the different figures truly mean.
Mean and average refer to the same thing. To calculate the mean, you need to add up all the values in the dataset (in our case, the average checking balance of each person) and then divide it by the number of people in the dataset.
On the other hand, the median is the value found in the middle of a group of numbers. To calculate the median, you would need to divide the number of people by two then look at the value for that entry. Because of how the median works, outliers don’t get diluted as much. That means it may represent a truer picture of what is happening on the ground.
Average Checking Account Balance
According to the Survey Of Consumer Finances, the average American household has an average balance of $41,600 in their checking account, while the median checking account balance is $5,300.
Here’s a breakdown of the average checking account balance by age:
|Age group||Median Checking Account Balance||Mean Checking Account Balance|
|Under 35 years||$3,240||$11,250|
|Between 35 and 44 years||$4,710||$27,910|
|Between 45 and 54 years||$5,620||$48,200|
|Between 55 and 64 years||$6,400||$55,320|
|Between 65 and 74 years||$8,000||$57,670|
|Over 75 years||$9,300||$60,410|
Survey of Consumer Finance Statistics
All data is taken directly from the Survey of Consumer Finances (SCF) carried out by the Federal Reserve. The SCF is a statistical survey that looks at different financial statistics within the U.S. population. It is carried out every three years. The latest dataset available is for 2019.
Why is it important to track your average account balance?
Knowing your average account balances is important for many reasons. Most checking accounts come with a monthly service fee, which is waived when maintaining a certain average account balance. It pays to track your average checking account balance.
On the other hand, you also need to ensure that you’re not going over the FDIC insurance limits. The FDIC (or NCUA if your account is held at a credit union) insures accounts up to a certain limit – $250,000 in most cases. If your average account balance is higher than this amount, you could be taking on unnecessary risks and might want to consider moving some of that money into a new account.
Most checking accounts do not earn interest either, and the ones that do usually have very low rates. If your average checking account balance is higher than it needs to be, you could be missing out on earning interest.
How much money should you keep in your checking account?
Here are some things to keep in mind when considering the average balance you should keep in your account. After all, the purpose of your checking account should be to manage your day-to-day finances. While checking accounts do have advantages, they also have disadvantages.
Monthly service fee waiver requirement
Although there are free checking accounts, most accounts come with a monthly service fee, which the bank waives when a specific average account balance is maintained. The fee changes from one bank account to another, as do the requirements – the average you should keep in your account.
The fee might not be astronomical, but over time it adds up, which you can save by maintaining the required average balance.
Bills and expenses
The main purpose of a checking account is to manage your day-to-day finances. Unlike many savings accounts, there are no withdrawal restrictions, making it ideal to pay your monthly bills and monthly expenses.
Here, a budget can be advantageous as it allows you to plan your living expenses. Any extra funds are better off held in high-yield savings accounts or money market accounts where they will earn higher APY interest rates.
At the same time, you’ll want to make sure you have enough to cover all of your expenses, preventing you from taking out an overdraft since this can be quite expensive.
Most checking accounts are insured by the FDIC (banks) or NCUA (credit unions).
In most cases, the insurance limit is set at $250,000. Any funds that surpass this mark are uninsured, and while it’s unlikely the bank will go out of business, the risk is still there.
It might be wiser, then, to distribute your funds in a way that insurance cover is maximized, helping you reduce your risk.
While interest-bearing checking accounts are not the norm, some financial institutions offer them. Remember to compare the interest rate you’re getting and what you might be able to get elsewhere.
Average checking account requirements by the bank
Many banks also have different balance requirements on checking accounts. If you’re looking at getting a new checking account, you might want to consider this requirement when choosing the best account for you.
Here are some examples of checking account requirements today:
- Citi: Access Account Package: $1,500
- Citi: The Citibank Account Package – $10,000
- US Bank Easy Checking: $1,500
- US Bank: Platinum Checking: $25,000
- Capital One: 360 Checking Account: $0
- Chime: Spending Account: $0
- Axos: Essential Checking: $0
- Axos: CashBack Checking: $0
- Bank of America: Advantage Plus: $1,500
Frequently Asked Questions
What is the average daily balance on a checking account?
U.S. households have an average bank account balance of $41,600 in the checking account.
How much does the average person have in their bank account 2021?
According to the Federal Reserve survey, the average American family had $362,920 in financial assets in 2019.
The survey is run every three years, so there is no data for 2021. The next survey in line will be for 2022.
What is a good amount to have in a bank account?
The average balance might be a good amount to have in your transaction account. You may also choose a personal finance strategy that focuses more on retirement accounts, for example, helping you earn more interest over time.
While people with higher incomes tend to have more money in their bank accounts, you need to find the right strategy for you.