Savings accounts, while not as easily accessible as checking accounts, still offer some access to your funds. There’s a reason for this: Savings accounts are primarily designed for building emergency funds and saving for other purposes, not for everyday expenses.
With a few exceptions, you can’t withdraw money directly from a savings account. Instead, you must transfer the money from your savings account to another account. Even then, financial institutions often limit the number of withdrawals or transfers an account holder can make from their savings account each statement period.
Why are there limits on withdrawals from savings accounts?
There’s a reason consumers are limited in their ability to make payments from their savings accounts: They aren’t designed for frequent transactions.
Historically, the Federal Reserve has limited the number of transfers or withdrawals from a savings account to six per statement period under Regulation D. This regulation defines a savings account as a nontransaction account, meaning that it is not primarily used for trading purposes.
However, in response to the coronavirus pandemic, the Federal Reserve Board amended Regulation D to remove the six-times-per-month limit. Now, some banks allow customers to make more than six transactions from their savings accounts. While banks are not required to comply with the amended rule, many banks are relaxing the limit to make it easier for customers to access cash when they face financial hardship.
Still, many banks limit savings account transactions to six per month. Consumers who exceed this limit may be charged fees or, in extreme cases, may have their accounts closed. Banks may also convert savings accounts into checking accounts if the transaction limit is exceeded multiple times.
How to spend money from your savings account
Although savings accounts aren’t designed for frequent transactions, they do provide a way for you to access and ultimately spend your money.
Withdraw cash
Perhaps the easiest way to spend money in a savings account is to withdraw it.
To withdraw cash, go to your local branch and ask a teller to withdraw funds from your savings account. You can also use your ATM card to withdraw money at almost any ATM, although you may be charged a fee if you use a machine outside your bank’s network.
If you have a checking account with the same bank, you can usually use your debit card to withdraw money from your checking or savings balance at an ATM or in a branch.
However, if you withdraw cash from an ATM, be aware that there will likely be limits on the amount you can withdraw. Typically, banks will allow you to withdraw a maximum of $500 to $1,000 per day from an ATM.
remit payment
Another way to move money out of a savings account is to transfer it to a checking account. If you don’t have access to ATMs or branches, or don’t want to use cash, a checking account might be a better option.
Most banks allow customers to easily transfer money between accounts through their mobile banking apps without the help of a human. As long as your checking and savings accounts are with the same bank, transfers are usually instant. Money deposited in your checking account can be used to make payments.
To transfer money from your savings account via mobile or online, follow these steps:
- Log in to your mobile or online banking and go to the “Transfers” tab.
- Select your savings account as the “From” or “Source” account.
- Select your checking account as the “To” or “Destination” account.
- Enter the amount you want to send.
- Double check the account and amount before sending the transfer.
- Make sure you receive a confirmation message to let you know the transfer has started or completed.
Points to note: The exact terms of your transfer options may vary by bank or credit union. If you don’t use online or mobile banking, you can also initiate a transfer in a branch, over the phone, or at some ATMs.
Receiving a bank check
A cashier’s check is a guaranteed payment method and another valid way to pay from your savings account. You can obtain a cashier’s check by going to a bank or credit union and prepaying the cost of the check using money from your savings account. The check can then be used instead of cash when making payments.
Because you pay a fee to have a financial institution issue the check, all transactions covered by the check are backed by the financial institution’s funds, not your personal account, and the check cannot be dishonored.
Banks and credit unions typically charge a fee for writing checks.
Direct debit
Some banks and credit unions allow customers to set up accounts to have bills from utility companies, credit card companies, and other companies debit their savings accounts. You must provide your account information, such as account number and branch number, and once approved, the billing company can withdraw funds directly from your savings account. However, some companies only allow debits from checking accounts, and some banks may block such transactions.
However, setting up bill payments directly from your savings account may not be the best option because each transaction counts against your bank’s withdrawal limit and can incur fees if you exceed your limit. Plus, it’s easy to forget to keep track of your automatic payments, and if you don’t frequently check your savings account balance, your bill payments could be declined if you don’t have enough funds.
Alternative payment method to a savings account
Generally, savings accounts are not suitable for everyday transactions. Instead, consider other types of savings accounts, such as current accounts, or other types of financial products, such as credit cards that offer rewards such as cash back.
If you want an account that earns interest but also allows you to use a debit and ATM card, consider a money market account. Many banks place transaction limits on these accounts, but they tend to offer higher yields than interest-bearing checking accounts, making them a good hybrid option.
Conclusion
Savings accounts are a great place to store money for the medium or long term, and this is one of the many differences between current and savings accounts.
If an emergency occurs, withdrawing cash or transferring money to a checking account is the most convenient way to use money from your savings account. However, it’s best to minimize these transactions as much as possible to avoid going over your bank’s limits and incurring fees. Also, keep in mind that moving money out of your savings account slows your ability to grow your savings.
If you need an account for frequent transactions, consider opening a checking account. Use your checking account for spending and build up your savings with the money you have left over.
