A year ago, as the U.S. economy shut down during the pandemic and millions lost their jobs, the Federal Reserve Board changed a banking rule to give people easier access to the money in their savings accounts.
The board allowed banks and credit unions to offer customers unlimited withdrawals or payments from savings accounts each month. The change also applied to money market accounts — hybrid accounts that typically pay slightly higher interest rates and that come with an ATM card and limited checking privileges.
The change, the board said, would allow consumers to get their money more easily, "at a time when financial events associated with the coronavirus pandemic have made such access more urgent."
Before the pandemic, a federal banking rule capped at six the number of withdrawals or transfers that customers could make monthly. When customers exceeded that limit, banks often charged a fee — $5, $15 or more. Banks sometimes warned customers that they would close the account or convert it to a checking account, which often pays little or no interest, if customers repeatedly exceeded the cap.
The rule change, however, didn't require banks to drop the limits. Some banks temporarily suspended their caps and accompanying fees, allowing customers unfettered use of their savings. But others kept both limits and fees in place, and continue doing so, even though the rule change appears to be permanent or at least long term, said Ken Tumin, founder and editor of DepositAccounts.com, which has tracked banks' policies.
According to its response to frequently asked questions on its website, the Federal Reserve "does not have plans to reimpose transfer limits" but may make "adjustments" to the definition of a savings account "if conditions warrant."
Some institutions, in their account disclosures, still cite the federal regulation as the reason for imposing the limits and charging the fees. But, Tumin said, "it's because of their policy, not the federal regulation anymore."
Because banks vary in their approach, it makes sense to check how yours handles savings withdrawals so you can avoid any surprise fees. It's especially important to avoid excess fees because current interest rates on most savings accounts are already anemic, and a fee can eat into monthly interest.
American Express' online bank offers a high-yield savings account for which it increased the maximum number of withdrawals to nine from six per statement cycle to "provide increased flexibility" for customers, said spokesman Andrew Johnson. The bank doesn't charge fees but cuts off transfers after the ninth one, he said. Then, customers must call the bank and request that the funds be sent by check. The savings accounts "are not meant for everyday spending," the bank's website says.
Ally Bank, also an online institution, charges a $10 "excessive transaction" fee after six withdrawals, but it is "temporarily" refunding the fee to help customers affected by COVID-19, its website said.
Online bank Marcus doesn't mention fees on its website, but it notes, "At this time, there is no limit to the number of withdrawals or transfers you can make."
Chase Bank limits savings withdrawals to six and charges a $5 fee on any over the limit — even for withdrawals made at a branch or an ATM, which were exempt under the old federal transaction rule. The bank waives the fee on its "premier" savings account if the balance is at least $15,000.
"Our savings products are designed for customers to set aside funds for emergencies and long-term goals, not typically to be used as a primary operating account for making regular withdrawals," Chase spokeswoman Elizabeth Seymour said in an e-mail.
Bank of America sets a cap of six withdrawals and transfers, and charges $10 for each deduction over the limit, up to a maximum of six fees — $60 — per statement cycle. (You won't be charged the fee if you have a minimum balance of $20,000 or enroll in the bank's "preferred rewards" program.)
Citibank ended withdrawal limits this month and didn't previously charge fees, a bank spokesman said.
Credit unions, which are nonprofit, depositor-owned institutions, vary in their approach to transfer fees as well. Mike Schenk, chief economist for the Credit Union National Association, said he didn't have comprehensive data on what credit unions were doing. But, he said, his calls to several credit unions found that "most don't charge those fees anymore." The association has long supported an elimination of the transaction cap as best for depositors, he said.
