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 you grow your savings over time. Online banks are a particularly attractive option because they often pay higher interest rates than those offered by traditional banks.
One downside to keeping your money in a savings account is that it is more difficult to access and spend your money. With a few exceptions, you can’t spend money directly in your savings account. Instead, you need to find other ways to access your money before you spend it. Even so, financial institutions tend to limit the number of payments or transfers you can make from your savings account during each account period.
Why are there limits to the amount of deposits you can make to your savings account
The reason you are limited in your ability to make payments from a savings account is that it was not designed for frequent transactions.
Federal law supports this idea. Regulation D, a bank regulation, historically limits the number of transfers or withdrawals from savings accounts to six or less per statement period. Certain transactions, such as withdrawals in person or at ATMs, 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 could lead your bank to close the account.
In light of the coronavirus pandemic, however, the Federal Reserve has gave 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 the money in your savings account
While savings accounts aren’t designed for frequent transactions, there are ways to access and spend your money.
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 allow you to 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 an ATM card. If you have a checking account at the same bank, your debit card usually gives you the choice of making withdrawals 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 checking account. . With most banks, you can do this easily through your phone without the help of a bank representative. As long as your checking and savings accounts are at the same bank, transfers are usually instant.
Once the money is transferred from your savings account to your checking account, you can swipe your debit card to pay for any purchase you want to make.
Get a cashier’s check
If you go to your bank, you can ask the bank 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.
On rare occasions, you can set up a direct debit to pay a bill from your savings account.
To do this, you will need to work with the company that sends you the bill, such as a utility company or a credit card issuer. When setting up automatic withdrawals, fill in your savings account information. When you authorize a payment, the billing company can withdraw funds directly from your savings account. However, some businesses will only carry out direct debits from current accounts and some banks may block such transactions.
In general, 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 may also not be monitoring your savings account as closely as you are checking your checking account, which may result in 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. It is one of the many differences between checking accounts and savings accounts.
If you need an account for frequent transactions, consider open a current account. There is no reason why you cannot have a checking account for the money you will need in the short term and a savings account for the money you can afford to put aside. In fact, savings accounts are a great way to separate some of your funds from your spending money, which can make it easier to build a emergency fund or save towards a goal.
Image presented by wavebreakmedia from Shutterstock.