I’m a Banking Expert: 5 Things To Know About Savings Account Withdrawal Limits
People often talk about how you should get a savings account to keep your money safe and accessible. And while many Americans do have a savings account, or at least a checking account, an estimated 5.9 million households don’t have a bank account at all, according to the FDIC.
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If you do have a savings account, or if you’re thinking about finally opening one up, you’ll want to choose a bank that meets all your needs. Along with this, it’s important to understand the limits and restrictions of these accounts.
Whether you go with a brick-and-mortar bank or credit union or a digital bank, your savings account might have withdrawal limits. Before you choose one to stash your hard-earned money, here are some things you should know about these limits — according to banking professionals Dan Kroytor and Gates Little.
Banks Limit the Number of Free Withdrawals You Can Make
If you need your money to be accessible, savings accounts are generally a better option than, say, certificates of deposit (CDs) or other investment accounts. This is because most savings accounts allow you to withdraw or transfer money into your checking account and use it as needed. The transfer times are generally quick, too, often occurring right away or within the same day.
But despite being convenient, savings accounts typically come with a limit on the number of free withdrawals or transfers you can make.
“The top thing anyone should know about savings account withdrawal limits is that most savings accounts restrict the number of withdrawals or transfers you can make each month without incurring fees or penalties,” said Dan Kroytor, banking professional and CEO of TailoredPay.
“Federal regulations typically impose these limits, with the standard limit being six withdrawals or transfers per statement cycle for savings accounts in the U.S.,” he continued. “Exceeding these limits can result in fees or your savings account being converted into a non-interest-bearing account.”
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Transfer Limits May Vary
Back in 2020, the Federal Reserve revoked its six-per-month transfer and withdrawal limit. That doesn’t mean that banks have to follow this rule, however.
In fact, many traditional and high-yield savings accounts (HYSAs) still keep this limit — as per Kroytor and federal regulations. But not all banks are the same, and each institution can set its own limits.
Some banks offer savings accounts with unlimited transfers — all penalty-free. If you go with a bank that offers an account with a higher yield, it might come with stricter limits. For example, they might limit the number of outgoing transfers or withdrawals you can make without incurring a penalty.
Whatever the case may be, your bank must comply with the Truth in Savings Act’s Regulation DD. This requires them to disclose things like account fees and limitations before you officially open the account. Be sure to review the terms and conditions carefully so that you know what you’re getting before committing to anything.
Savings Accounts Are Often Subject to NSF Fees
Non-sufficient funds fees, or NSF fees, are what happen when you fall below the account limits or don’t have enough to cover a scheduled transaction.
“Beware that banks usually charge [a] non-sufficient funds if you’ve emptied your account,” said Gates Little, CEO and U.S. President of altLINE by The Southern Bank. “Say you have an automated bill payment coming in, but you’ve dried up your savings. You won’t be able to cover that bill and, on top of that, the bank will charge you a fine once money is recharged to your savings.”
NSF fees can add up quickly. The more frequent withdrawals you make from your savings account, the higher the chances that you’ll incur this fee at least once as an account holder.
But how much are NSF fees, anyway?
“The exact amount charged depends on the bank, and I’ve seen this go up to as much as $40 per unsuccessful transaction,” said Little.
And if your bank does have a minimum account balance requirement, you could be charged more than just the NSF fee. You could also be charged an additional fee — like a monthly maintenance fee — for falling below that minimum.
Overdraft Protection Won’t Always Protect You
“Some people think that overdraft protection will safeguard them from paying NSF fees, but it can turn out to be just as costly,” said Little. “With overdraft protection, the bank transfers funds from your connected checking account to cover your payment. However, you’ll still need to pay a service fee for the transfer and overdraft protection charges. The only bright side is that you’ll still be able to pay that bill on time or make that important transaction.”
Again, not all banks are the same, though. Your institution might offer free overdraft protection. Be aware that certain perks like this one sometimes come with the caveat that you must maintain a minimum account balance or meet other requirements first.
Higher Interest Rates May Come With Additional Requirements
Part of choosing the best savings account entails picking one with the highest or most competitive yield or rate.
“Look for accounts with competitive interest rates offered consistently over those that push promotional rates,” said Kroytor. “Some of the most popular banks only offer 0.01% compounded interest on your savings, whereas others … offer 1% interest, one hundred times more than their competitor.”
But higher rates aren’t the only key factor. You’ll want to make sure you’re not going to lose that rate by making too many withdrawals or transfers.
“Pay attention to any conditions or restrictions associated with the interest rate, such as tiered rates based on account balance or introductory rates that may expire after a certain period,” said Kroytor. “While a higher interest rate can help your savings grow faster, considering other service features, such as fees, minimum balance requirements and access to additional services, is crucial,” said Kroytor.
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This article originally appeared on GOBankingRates.com: I’m a Banking Expert: 5 Things To Know About Savings Account Withdrawal Limits
