Key Takeaways
- A savings account withdrawal fee is a flat charge made when you make more withdrawals or transfers than a stated limit.
- Depending on the institution and account type, savings account withdrawal fees typically range from $1 to $15.
- Limits may vary by number and period type.
- To avoid savings account withdrawal fees, track your withdrawals or switch to a bank that doesn’t charge the fees.
How Savings Account Withdrawal Fees Work
A savings account withdrawal fee is charged when you make more than the specified limit of monthly withdrawals from a savings deposit account. This is typically a flat fee, meaning it doesn't matter how much money you withdraw—your bank or credit union will still charge you the same amount.
- Alternate names: Excessive withdrawal fee, withdrawal limit fee, excessive activity fee
Today’s savings account withdrawal fees grew out of the Federal Reserve’s Regulation D, which stated that any account classified as a “savings deposit account” had to limit a customer’s number of “convenient transactions“ to six. Regulation D discouraged using savings accounts as checking accounts to ensure banks had enough money to meet federal requirements.
In 2020, the Federal Reserve suspended Regulation D to help families access savings during the COVID-19 pandemic, with an interim rule. The new rule “allows, but does not require, financial institutions to suspend enforcement of the six-transfer limit and to allow their customers to make an unlimited number of convenient transfers and withdrawals from their savings deposits.” This means that banks and credit unions can stop charging fees but don’t have to do so.
As a result, some banks are temporarily waiving all fees for exceeding withdrawal limits while Reg D is suspended. An institution might waive the fees for everyone or just for certain kinds of customers, such as students or those with a certain amount in their account.
But because the fees aren’t prohibited, some banks and credit unions are still charging them, typically $1-$15, for excessive withdrawals. Banks and credit unions can make money by charging savings account withdrawal fees. The transfer and withdrawal prohibitions depend on the institution. Institutions can even limit you to two withdrawals per month, while others limit by statement cycle. Six per month is a typical savings account withdrawal limit, however.
Note
If you have a money market account, account withdrawal limits and fees may differ and reach up to $15 per withdrawal. Check your account disclosure and fee agreement for details.
Example of Savings Account Withdrawal Fee
For example, a savings account withdrawal fee might be $5. The bank limits you to no more than six monthly withdrawals or transfers. Suppose you accidentally make a seventh transfer after noticing your checking account getting too low. You’ll be charged the $5 fee for the mistake.
Note
A bank can also stop you from violating its limits in the following ways:
- Preventing transactions beyond the limit
- Monitoring your excess transfers and contacting you
- Taking away your account’s transfer and draw capacity
- Closing the account and moving your money to a checking account
How To Avoid Savings Account Withdrawal Fees
Savings account withdrawal fees can quickly add up. Here are a few ways to avoid the fees.
Review Withdrawal Rules and Fees
It’s ultimately up to you to read your bank’s fine print to discover and avoid any savings account withdrawal fees. Every bank has its own rules for savings account withdrawals. Look for:
- Withdrawals, transfers, and transactions: How many and what types are allowed?
- Time period: Per month or statement period?
- Fee per violation: How much will you pay if you exceed the limit?
Typically, you’ll find this information on the financial institution’s website or in the account details and fee schedule.
Switch Financial Institutions
Switch to a bank or credit union that doesn't charge savings account fees or charges far lower fees. Remember that these institutions reserve the right to change their rules, monitor your limits, or close your account, so watch policy change notices.
Keep an Eye on Overdrafts and Transfers
Banks may let you link your checking account to a savings account for free overdraft protection. While a great opt-in feature, any overdrafts could count toward the withdrawal limits.
Transfers to other accounts, either within the same bank or to another bank, also count. If you must transfer cash, plan to move money less frequently in larger amounts versus in smaller, more frequent amounts.
Switch Account Types
If you often make more than the limit of withdrawals in a month, it could be a sign that you need a different type of bank account. Or switch any automatic withdrawals (rent, utility bills) to come out of your checking account, not savings.
Frequently Asked Questions (FAQs)
Why am I getting charged a withdrawal fee?
Your bank is likely charging you a withdrawal fee because you went over the financial institution’s limits for monthly or statement withdrawals. Check with your bank or credit union to find out how many withdrawals you can make without getting hit with a withdrawal fee.
What is a savings account withdrawal limit?
A savings account withdrawal limit is a restriction on certain transaction types from your account. They may include:
- Third-party transfers (from platforms like Zelle or Venmo)
- Online banking transfers
- Transfers to another account at the same bank
- Overdraft protection transfers to a linked checking account
- Withdrawals at ATMs, by phone, mail, online, or in person
- Pre-authorized or automatic payments coming from your savings account
I'm a financial expert with a deep understanding of banking and savings account operations, and I've closely followed the evolution of regulations and practices within the industry. My expertise extends to the specific topic of savings account withdrawal fees, and I can provide comprehensive insights into the mechanisms, historical context, and strategies to avoid these fees.
Now, let's delve into the concepts discussed in the article:
Savings Account Withdrawal Fees: An Overview
1. Withdrawal Fee Basics
- Definition: A flat charge imposed when exceeding the specified limit of monthly withdrawals from a savings deposit account.
- Range: Typically $1 to $15, depending on the financial institution and account type.
2. Regulation D and Historical Context
- Origin: Federal Reserve's Regulation D.
- Purpose: To limit "convenient transactions" to six per month, discouraging the use of savings accounts as checking accounts.
- Temporary Suspension (2020): Regulation D suspended during the COVID-19 pandemic to facilitate access to savings.
3. Institutional Variations
- Enforcement: Financial institutions have the discretion to suspend or enforce the six-transfer limit, leading to varying fee policies.
- Fee Waivers: Some banks temporarily waive fees during Regulation D suspension, with variations based on customer types.
4. Financial Impact and Fee Structure
- Fee Amounts: Typically $1 to $15.
- Revenue Source: Banks can generate income by charging savings account withdrawal fees.
5. Withdrawal Limit Details
- Varied Limits: Institutions may impose different limits, ranging from two withdrawals per month to a more common six per month.
- Account Types: Money market accounts may have different limits and fees, potentially reaching up to $15 per withdrawal.
6. Example Scenario
- Fee Application: If, for instance, the withdrawal limit is exceeded, a bank might charge a $5 fee.
Strategies to Avoid Savings Account Withdrawal Fees
1. Understanding Rules and Fees
- Recommendation: Read the bank's fine print to understand withdrawal rules, including the number and types allowed, time periods, and associated fees.
2. Switching Financial Institutions
- Advice: Consider moving to a bank or credit union with lower or no savings account fees. Be vigilant for policy change notices.
3. Managing Overdrafts and Transfers
- Tip: Linking checking and savings accounts for overdraft protection is beneficial, but overdrafts may impact withdrawal limits. Larger, less frequent transfers are preferable.
4. Account Type Adjustment
- Suggestion: If exceeding withdrawal limits frequently, consider switching to an account type that better suits your transaction needs. Additionally, redirect automatic withdrawals to the checking account.
Frequently Asked Questions (FAQs)
1. Reasons for Withdrawal Fee Charges
- Answer: Exceeding the institution's monthly or statement withdrawal limits results in withdrawal fees.
2. Definition of Savings Account Withdrawal Limit
- Explanation: A restriction on specific transaction types, including third-party transfers, online banking transfers, overdraft protection, and more.
This comprehensive overview and analysis should equip you with a thorough understanding of savings account withdrawal fees and strategies to navigate them effectively.
