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Money market accounts and interest-earning checking accounts let you earn interest on your money while giving you access to ATMs, debit cards and online banking. But you might have to meet strict eligibility requirements or settle for a lower interest rate to qualify.
Can I pay bills from my savings account?
Generally, no — though you may occasionally see exceptions. Paying bills from your savings account would be detrimental to your savings goals, so most banks don’t allow you to write checks, use a debit card or pay bills from your savings account.
If you want to withdraw any money from your account, you usually have to transfer the funds to a linked checking account. Once the money arrives in the linked account, it can then be used to pay your rent and other bills.
But some companies, like TurboTax, will let you pay from a savings account using what’s known as a direct debit.
What is a direct debit?
When you set up a direct debit from your bank account, you give a third-party service provider permission to withdraw money from your account. But it’s not a good idea to use these often, as they increase your chance of going over your account’s withdrawal limit.
Savings account withdrawal limits
Savings accounts aren’t meant to function like checking accounts. Typically, Regulation D sets limits on how certain types of bank accounts can be used. If you make more than six withdrawals from your savings account per month, your bank can charge you penalty fees, convert your account to a checking account or even decide to close your account altogether.
Cash and ATM withdrawals aren’t included in the six-per-month federal rule, but some banks will choose to penalize those types of excessive withdrawals, too.
That said, Regulation D is currently suspended, and many banks are temporarily waiving the six-monthly transaction limit.
Is a high-interest savings account right for me?
It depends on how you want to use your account. If you want to take advantage of the maximum interest rate offered by a high-interest savings account, you’ll need to be willing to accept limitations on how you can access your money. You’ll be able to make a limited number of withdrawals, and it might not be possible to pay bills directly from your savings account.
If you want to earn interest while regularly moving money into and out of your account, you may be better off with a money market or interest-earning checking account.
Money market accounts
While money market accounts are still governed by Regulation D, meaning you’re limited to six penalty-free withdrawals per month, they offer easier access to your money.
Certain accounts will come with a checkbook, debit card and/or ATM access. Others will allow you to use your funds for investments. But you may need to meet a higher minimum balance requirement to be eligible for a money market account.
Interest-earning checking accounts
Conventional checking accounts don’t allow you to earn any interest on your balance. Instead, their main focus is on making it as easy as possible to manage your day-to-day spending through ATM withdrawals, direct debits and online transfers.
However, some banks also offer interest-earning transaction accounts. These accounts offer many of the same features as an ordinary checking account, including the ability to pay bills directly from your account, but they also allow you to earn interest on your balance. They also typically charge minimal or no ongoing fees.
But these accounts don’t come with interest rates as high as those on regular savings accounts, and they may also place limitations on how many transactions you can make each month.
The interest rate. Even a small variation in the interest rate can make a big difference over time.
Account terms and conditions. Read the fine print to make sure you’re aware of any restrictions or conditions that apply to your account. For example, is there a limit on the number of withdrawals you can make? Do you need to deposit a minimum amount each month to avoid fees?
Fees. Check what fees you might be charged, including ongoing monthly or yearly fees, overdraft fees and penalty fees for making too many transactions.
Account access. Check what options you have for accessing your money, including online, debit card, ATM, checkbook and local branch access.
Online banking portal. Read reviews of the bank’s Internet banking portal and mobile banking app — if you bank online, a user-friendly app can make a big difference.
Customer service. Investigate the bank’s reputation for providing prompt and helpful customer service. Is support available online, over the phone and via email if you ever need help?
Tips for setting up automatic bill payments
If you’re setting up direct debit with a company:
Do your research. Before giving a company your bank account information, make sure it’s trustworthy.
Check your balance. If you don’t have enough in your account for the payment, you could be on the hook for penalty fees.
Check your statements. Setting up a direct debit means that you’ll run the risk of being incorrectly charged for something. Check your monthly bank statements to make sure you’re not getting ripped off.
Bottom line
Most traditional savings accounts won’t let you pay bills online or by check, but some money market accounts and interest-earning checking accounts will. However, you may have to settle for a lower interest rate or meet stricter eligibility criteria.
Yes, most banks will let you open both a checking and savings account. Many will also let you link the two accounts so that you can easily transfer money between them.
Yes, the same six-withdrawal limit applies to transfers to linked accounts. However, some banks may choose to waive the fee while Regulation D is temporarily suspended.
It depends. According to Regulation D, these types of transactions don’t count toward the limit. But some banks may choose to count them anyways, imposing fees for excessive ATM or bank branch withdrawals.
Ryan Brinks is a former editor and publisher at Finder, specializing in investments. He holds a journalism degree from University of Wisconson–River Falls.
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