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Checking accounts are designed for everyday money management, including paying bills, either online, via debit card, or by check. Savings accounts, on the other hand, are set up for saving rather than spending. These accounts typically pay a higher interest rate on your balance to incentivize saving, and don’t provide the same ease of access as checking accounts.
That said, it’s possible to pay bills using your savings account. Whether or not you should, however, is another question. Here’s a look at when and how you might use your savings account to cover bills, whether it’s a one-off expense or a recurring payment.
Key Points
• While it’s possible to pay bills from a savings account, these accounts are designed for saving rather than everyday spending and lack the convenience of checking accounts.
• You can access savings funds to pay bills by withdrawing cash, transferring money to a checking account, using bill pay (if allowed), or purchasing a cashier’s check.
• Savings accounts are best used for emergency funds and short-term goals because they earn interest and encourage limited withdrawals.
• Frequent bill payments from savings may trigger transaction limits, fees, or reduced savings growth due to lower balances.
• In most cases, using a checking account or other payment methods is more practical and efficient for paying regular bills.
How to Pay Bills From Your Savings Account
Since savings accounts aren’t set up for covering regular expenses, they don’t come with checks or a debit card. However, there are some other ways to pay bills with a savings account. Here are some to consider.
Withdraw Cash
If you’re able to pay a bill in cash, you can withdraw it from your savings account at an ATM using your ATM card or, if you also have a checking account at that bank, your debit card. To avoid fees, be sure you use an ATM that’s in your bank’s network. Also, keep in mind that banks typically allow a maximum of $300- $1,500 to be withdrawn at an ATM per day. You can withdraw more cash if you go to a teller.
Make a Transfer
A simple way to use your savings account to pay a bill is to transfer the needed amount into your checking account, then make the payment from there. You can typically make this kind of transfer by using your banking app, logging into your account online, or visiting a local branch.
If your checking and savings accounts are at the same bank, the transfer is usually immediate. If your savings account is at a different financial institution than your checking account, it may take up to three days to post.
Recommended: How to Transfer Money From One Bank to Another
Use Bill Pay
In some cases, you may be able to set up a direct recurring payment from your savings account to a company or service provider, such as your credit card issuer or utility company. To do this, you’ll need to supply the billing company with the routing and account number for your savings account. Once the account is authorized, that company can then debit funds from your savings account.
Keep in mind, however, that some billing companies don’t allow automatic debits to come from savings accounts. Plus, some financial institutions don’t permit this type of transaction.
Get a Cashier’s Check
For a large, one-time bill, you might consider using a cashier’s check. This type of check looks and works like a typical check, except it’s written by a bank or credit union for withdrawal from the institution’s account, instead of the customer’s personal funds. Because the financial institution guarantees the check, it’s considered a highly secure form of payment.
To use a cashier’s check to pay a bill with a savings account, you’ll need to visit your bank or credit union and purchase the check using funds from your savings account. Financial institutions typically charge a fee for cashier’s checks.
Recommended: Money Order vs Cashier’s Check: What’s the Difference?
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What Else Are Savings Accounts Used For?
Savings accounts work well for storing and growing funds you don’t need immediately but plan to use sometime in the next few months or years.
Since these accounts keep your money safe and accessible, they are ideal for building your emergency fund. A general rule of thumb is to keep at least three to six months’ worth of living expenses parked in a separate savings account that earns a competitive return, such as a high-yield savings account. When an emergency or unexpected expense comes up, you can then easily access those funds and immediately have the cash you need to deal with the problem.
Savings accounts also work well for short-term savings goals, such as paying for a vacation, a new car, or a home improvement project. For longer-term goals, such as retirement or a child’s college education, however, you’re likely better off investing your funds in the market, which involves risk but can provide greater returns over the long term.
Tips for Getting the Most Out of Your Savings Account
These strategies can help you maximize the benefits of a savings account.
• Select a high-yield or high-interest savings account. If your money is sitting in an account, earning as much interest on it as you can maximizes your cash.
• Set some specific savings goals. Understanding why you want to save money, whether it’s for a home, a vacation, or an emergency fund, can help you stay motivated to stick to your savings plan.
• Try to minimize withdrawals. To make sure your savings account grows, rather than shrinks, try to limit everyday spending to the money you have available in your checking account.
• Automate savings. To reach your savings goals faster, consider setting up a recurring transfer from checking to savings for a set day each month, ideally right after your paycheck clears.
Consequences of Paying Bills With Your Savings Account
In the past, the Federal Reserve has limited the number of transfers or withdrawals from a savings account to six per statement period under a rule called Regulation D. In response to the coronavirus pandemic, however, the Federal Reserve Board lifted the six-per-month limit. While some banks and credit unions have since loosened restrictions, many have chosen to continue imposing transaction limits. Exceeding the limit can result in a fee or, if it happens repeatedly, conversion or closure of your account.
Even if your bank doesn’t limit savings account transactions, using a savings account to pay bills generally isn’t as easy or convenient as using a checking account. Moreover, using your savings account for bill payments can reduce your balance, impacting your ability to earn interest and save for future goals.
Alternative Ways to Pay Your Bills
If you prefer to keep your savings account strictly for saving, here are some other ways you can pay your bills:
• Check
• Debit cards and direct debit from your checking account
• Online bill payment using your checking account
• Money order
• Cash (paid in person)
Some may also choose to use a credit card to pay bills in order to build credit or earn rewards. A word of caution, however. Using a credit card to pay bills may quickly lead to high-interest debt, if the payments aren’t paid off in full each month. It could also potentially damage your credit score, if it becomes difficult to keep up with payments.
The Takeaway
While it’s possible to pay bills from your savings account, it’s generally not the most practical or cost-effective option. Savings accounts are designed for saving money and earning interest, making them better suited for short-term saving goals rather than daily expenses.
That said, there may be times when you need to tap your savings to make a payment. In those instances, withdrawing cash or transferring money to a checking account are generally the most convenient ways to spend the money in your savings account.
Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with eligible direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.
FAQ
What ways can you spend using your savings account?
You can spend money from your savings account in several ways. You can withdraw cash at an ATM, transfer funds to your checking account (and spend them from there), get a cashier’s check, or, if your bank allows it, make direct online payments.
Why is it difficult to pay bills with your savings account?
Savings accounts are primarily designed for storing funds and earning interest, not for frequent transactions. As a result, many banks impose restrictions and fees to discourage the use of savings accounts for regular bill payments and everyday spending.
Can you pay direct debit from a savings account?
It depends on your bank and who you’re trying to pay. In some cases, you can set up a direct debit from a savings account, but some billing companies only allow debits from checking accounts, and many banks block these transactions. Even if autopay is available, savings accounts often limit transactions to six per month, so automatic debits could trigger fees, or in extreme cases, account closure.
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