A lot of people keep a pile of money in checking that never really gets spent. It isn't the bill money. It's the cushion, the amount you leave in there so you never have to watch the balance closely. For plenty of households that cushion runs several thousand dollars, and it sits there month after month.

Let's put a number on it. Say your checking balance never drops below $8,000.

What it earns where it sits

Most checking accounts pay little or nothing. At 0.01%, $8,000 earns about 80 cents in a year. That means the money is doing one job, being there just in case, and nothing else.

Two other places it could go

Move the same $8,000 to a savings account paying 4% and it earns about $320 in a year. Savings rates move up and down, so treat 4% as an example, not a promise. That interest is also taxable income, so in a 22% tax bracket you'd keep about $250 of it.

Now say you also carry $8,000 on a credit card at 24%. Carrying that balance costs roughly $1,920 a year in interest. Using the cushion to pay off the card stops that cost, which is six times what the savings account would earn, and interest you stop paying isn't taxed.

But paying off the card empties the cushion, and the cushion was there for a reason. If the car breaks down the next month, the easy move is to put the repair right back on the card at 24%, and you're back where you started.

Keeping a cushion without leaving the cash idle

What fixes this is having something ready that can step in on short notice, so the cash itself doesn't have to sit still. A line of credit is one option. That's an account the bank approves ahead of time, which you draw from when you need it and pay back as you go, and you pay interest only on what you've actually drawn. Another option is the cash value in a whole life policy, which you can borrow against without a credit check once the policy has built up value.

Either one lets the $8,000 go to work, paying down the card or earning interest, while you still have somewhere to turn if something breaks. That's one dollar doing two jobs: it's working, and it's still backing you up.

This only works if the backup is in place before you need it. A bank decides on a line of credit based on your income and credit today, and a new policy takes time to build cash value. Make sure you know how much you can reach, and how fast it lands in your checking account, before you move the cushion.

Find your own number

Pull your last six checking statements and find the lowest balance in each month. Bills came and went above that low point, and the money below it never moved. If it's in the thousands, that's the amount to put to work first, starting with whatever debt charges you the highest rate.