Savings accounts offer a degree of access to your funds, although they don’t offer the same level of convenience as checking accounts, and there’s a good reason for that. Savings accounts are primarily intended for the purpose of establishing an emergency fund or saving for specific goals, rather than for everyday spending.
With only a few exceptions, you can’t directly spend money from your savings account. Instead, funds in your savings account need to be transferred to another account for spending. Moreover, financial institutions often impose limitations on the number of withdrawals or transfers that account holders can make from their savings accounts during each statement period.
Why there are limits on payments from your savings account
Consumers encounter restrictions on making payments from savings accounts for a specific reason: Savings accounts were not originally designed for frequent transactions.
In the past, the Federal Reserve imposed limitations on the number of transfers or withdrawals from a savings account to six per statement period, in accordance with Regulation D. This regulation classifies savings accounts as nontransaction accounts, indicating that they are not primarily intended for day-to-day transactions.
However, as a response to the coronavirus pandemic, the Federal Reserve Board made changes to Regulation D, eliminating the six-per-month limit. Consequently, some banks may now permit customers to conduct more than six transactions from their savings accounts. While banks are not obligated to follow this amended rule, many have chosen to ease restrictions to facilitate their customers’ access to funds during times of financial hardship.
Nevertheless, numerous banks continue to uphold the six-per-month limit on savings account transactions. Customers who surpass this limit may face fees or, in severe cases, have their accounts closed.
How you can spend money from your savings account
Although savings accounts are not intended for frequent transactions, there are methods available for accessing your funds and, ultimately, utilizing them for spending.
Withdraw cash
Arguably the most straightforward method of accessing and spending money from your savings account is through withdrawals.
Cash withdrawals can be initiated by visiting a local branch and requesting a teller to withdraw funds from your savings account. Alternatively, you can use an ATM card at virtually any ATM, though it’s important to note that fees may be incurred when using a machine that is outside your bank’s network.
If you maintain a checking account with the same bank, your debit card usually offers the flexibility to make ATM or in-branch withdrawals from either your checking or savings balance.
However, it’s worth noting that when withdrawing cash from an ATM, there is often a limit on the amount you can withdraw. Typically, banks allow a maximum daily withdrawal limit ranging from $500 to $1,000 at an ATM.
Transfer money
An alternative method for moving funds from your savings account is by transferring them to your checking account, which may be a preferred option if you lack access to an ATM or a branch or simply prefer not to use cash.
Most banks enable customers to conveniently execute these transfers between accounts using a mobile banking app without requiring assistance from a bank representative. When your checking and savings accounts are held at the same bank, these transfers are typically instantaneous. Once the funds are in your checking account, you can utilize them for expenses.
To initiate a mobile or online transfer from your savings account, follow these steps:
- Access your mobile or online banking and locate the “Transfer” section.
- Select your savings account as the “From” or “Source” account.
- Choose your checking account as the “To” or “Destination” account.
- Enter the amount you intend to transfer.
- Double-check the accounts and the transfer amount before confirming the transaction.
- Ensure that you receive a confirmation message indicating that the transfer has been initiated or successfully completed.
Get a cashier’s check
A cashier’s check represents a secure form of payment and offers another practical means to access funds from a savings account. To obtain a cashier’s check, you can visit a bank or credit union and use funds from your savings account to cover the cost of the check. Subsequently, this check can serve as a reliable alternative to cash for making payments.
Because you pay the financial institution to issue a cashier’s check, any transaction covered by the check is guaranteed by the institution’s funds rather than a personal account. Consequently, the check is ensured not to bounce.
It’s important to be aware that banks and credit unions typically impose a fee for cashier’s checks.
Direct debit
Certain banks and credit unions offer the option for customers to establish direct debit arrangements for paying bills, such as those from utility companies or credit card issuers, directly from a savings account. To do this, you’ll need to provide your account details, including account and routing numbers. Once authorized, the billing company can initiate withdrawals directly from your savings account. However, it’s worth noting that some companies exclusively allow direct debits from checking accounts, and some banks may restrict such transactions.
While setting up bill payments directly from a savings account is feasible, it might not always be the most ideal choice. This is because each transaction contributes to the bank’s withdrawal limit, and exceeding this limit could result in associated fees. Additionally, automatic payments can sometimes be overlooked, and unless you regularly monitor your savings account balance, a bill payment may be declined due to insufficient funds.
Bottom line
Savings accounts are primarily designed for securely storing money over the medium or long term, distinguishing them from checking accounts.
In case of emergencies, the most convenient methods to access funds in your savings account are either cash withdrawals or transferring money to your checking account. However, it’s advisable to limit these transactions to avoid surpassing your bank’s limits and incurring additional fees. Moreover, it’s important to bear in mind that withdrawing funds from a savings account may impede your progress in building a financial cushion.
If you require an account for frequent transactions, it’s wise to consider opening a checking account. Utilize your checking account for everyday spending while continuing to bolster your savings by allocating funds you can comfortably set aside.