Savings accounts are a popular and safe place for people to keep their extra money. They pay interest based on your balance, which can help your savings grow over time. Online banks are a particularly attractive option as they often pay higher interest rates than those offered by physical banks.
One of the downsides of keeping your money in a savings account is that it’s harder to access and spend it. With few exceptions, you cannot spend money directly from your savings account. Instead, you need to find other ways to access your money before you spend it. Even then, financial institutions tend to limit the number of payments or transfers you can make from your savings account during each account period.
Why there are limits to the amount of payments you can make from your savings account
The reason you’re limited in your ability to make payments from a savings account is that they weren’t designed for frequent transactions.
Federal law supports this idea. Regulation D, a banking regulation, historically limits the number of transfers or withdrawals from savings accounts to six or fewer per statement period. Certain transactions, such as in-person or ATM withdrawals, do not count towards this limit. If you make more than six transactions in a single statement period, your bank may charge a fee. Regularly or excessively exceeding the limit may result in the account being closed by your bank.
In light of the coronavirus pandemic, however, the Federal Reserve Board has given banks the option to suspend Regulation D, allowing customers to make unlimited withdrawals or transfers from savings accounts. Banks are not required to do so, but many have reduced restrictions to make it easier for their customers to access their money in the face of financial hardship caused by the pandemic.
How to spend money from your savings account
Even though savings accounts aren’t designed for frequent transactions, there are ways to access your money and ultimately spend it.
take liquid
Arguably the easiest way to spend money in your savings account is to withdraw cash and spend that money.
You can go to your local bank branch and ask a teller to let you withdraw money from your savings account. Once the money is in your wallet, you are free to go to any store where you want to spend it.
Many banks also facilitate withdrawals from your savings account using a bank card. If you have a checking account with the same bank, your debit card usually gives you the choice of withdrawing from your checking or savings balance.
To transfer money
If you’re on the go and can’t find an ATM or branch to visit, or just prefer to avoid dealing with cash, you can also transfer money from your savings account to your current account. With most banks, you can do this easily via your phone without the help of a bank representative. As long as your checking accounts and savings accounts are with the same bank, transfers are usually instantaneous.
Once the money has moved from your savings account to your checking account, you can swipe your debit card to pay for any purchases you want to make.
Get a cashier’s check
If you go to your bank, you can ask the bank to issue a cashier’s check for you. You can cover the cost of the check using funds from your savings account. Then you can use that check to pay the person named on the check.
Debit
On rare occasions, you may set up direct debit to pay a bill from your savings account.
To do this, you’ll need to work with the company sending you the bill, such as a utility company or credit card issuer. When you go to set up direct debit payments, provide your savings account information. When you authorize a payment, the billing company may withdraw funds directly from your savings account. However, some companies will only make direct debits from checking accounts and some banks may block these transactions.
Generally, doing this is a bad idea. Keep in mind that these types of payments count towards the limit of six transfers per statement. It’s easy to accidentally go over the limit if you start paying bills with your savings. You also may not monitor your savings account as closely as you do your checking account, which could lead to you having less money in the account than you need to pay your bills.
At the end of the line
Ultimately, savings accounts weren’t designed for frequent transactions. Instead, they are best used as a place to store money for the medium to long term. This is one of the many differences between checking accounts and savings accounts.
If you need an account for frequent transactions, consider opening a checking account. There’s no reason you can’t have a checking account for the money you’ll need in the short term and a savings account for the money you can afford to set aside. In fact, savings accounts are a great way to separate some of your funds from spending money, which can make it easier to build an emergency fund or save for a goal.
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