A new Federal Reserve ruling will make it easier for many people to pull money out of their savings accounts each month.
The nation’s central bank temporarily has suspended a rule that normally limits certain types of withdrawals of money from savings accounts to six transactions per month.
For now, you may be able to take unlimited withdrawals without penalty. This applies to both savings accounts and money market accounts.
Typically, you are at risk of having to pay a fee to your bank if you make more than a half-dozen withdrawals from your savings account each month.
But the Fed’s rule change gives banks the option to suspend the six-withdrawal limit. As the Fed explains it:
“The interim final rule permits depository institutions to suspend enforcement of the six-transfer limit, but it does not require depository institutions to do so.”
So, if you need to make more than six withdrawals from a savings or money market account in a given month, check your bank’s own policy first.
The Federal Reserve says it is enabling banks to allow unlimited withdrawals “at a time when financial events associated with the coronavirus pandemic have made such access more urgent.”
USA Today notes that the Fed can make the switch because in March, it eliminated reserve requirements for banks in the hope that doing so would help banks lend money during the crisis. According to the publication:
“Previously, banks had to hold some money in reserve against funds withdrawn from checking accounts. Since savings accounts had no such reserve mandate, customers were limited to six withdrawals or transfers each month.”
Where to put your emergency savings?
The coronavirus pandemic has caused a wave of unemployment rivaling that of the Great Depression. Unfortunately, millions of Americans were not prepared financially to deal with such a crisis.
A 2019 Federal Reserve study found that 30% of U.S. adults were “either unable to pay their bills or are one modest financial setback away from hardship.”
No one can say how long the pandemic will last. For that reason, it is wise to start — or to add to — an emergency fund. We offer pointers for doing so in “9 Tips for Starting an Emergency Fund Today.”
A savings account isn’t your only option when creating an emergency fund, however. For more options, check out “The 3 Best Places to Keep Your Emergency Fund.”
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