Banks can now allow savings account holders to make an unlimited number of transfers or withdrawals, the Federal Reserve Board announced Friday.
The Fed removed the previous limit of six transfers or withdrawals per month in order to allow people greater access to their personal savings during this time of economic uncertainty and widespread unemployment.
The Fed said financial events associated with the coronavirus pandemic have made access to savings accounts more urgent. There is also an increased need for people to be able to access their money remotely since bank branches and other in-person options have been shut down.
Additionally, the Fed said, banks no longer need to keep a regulatory distinction between checking accounts and savings accounts. However, banks are not required to take this action.
The change also does not prohibit banks from charging their customers fees for transfers or withdrawals beyond the six transfer limit.
But having quick access to your cash comes with downsides, said Greg McBride, chief financial analyst for Bankrate.com.
“Making it easier for people to get money out of their savings account during difficult and challenging financial circumstances is beneficial,” he said. “But I worry about the unintended consequences.”
As savings accounts become more like checking accounts, the interest rates will look more like checking accounts, he said.
“The average checking account pays about one-third of what a money-market deposit account pays,” he said.
Account holders will need to check with their institutions to determine how this interim rule will be implemented, but greater access could provide more flexibility to people working to cover their expenses.
“If you’re experiencing a hardship right now and you have the savings, that should be your first stop,” said McBride. “If it is easier to get your savings now and it keeps your hands off retirement accounts, that is great.”
But for many people the problem with using their savings now isn’t that they don’t have access, he said, it is that they don’t have any savings or it is already exhausted.