Search

Banks Were Allowed to Give People More Access to Savings in the Pandemic - The New York Times

ultrasimi.blogspot.com

But the rule change by the Federal Reserve Board didn’t require banks to drop their limits, and some haven’t.

A year ago, as the 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 come with an A.T.M. 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, the 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, Mr. 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 a spokesman, Andrew Johnson. The bank doesn’t charge fees, but cuts off transfers after the ninth one, he said. To withdraw money in excess of the cap, 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 bank, charges a $10 “excessive transaction” fee after six withdrawals, but is “temporarily” refunding the fee to help customers affected by Covid-19, its website says.

The online bank Marcus doesn’t mention fees on its website, but 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 from an A.T.M., 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,” a Chase spokeswoman, Elizabeth Seymour, said in an email.

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 $10,000 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, and many credit unions routinely waive the fees anyway.

Nevertheless, some credit unions, including Alliant and PenFed, still cite the old federal six-withdrawal limit restriction on their websites. “If I exceed these limitations my account will be subject to an excessive transaction fee and may be closed,” PenFed’s general savings disclosure says.

Eliminating transaction caps may end up changing consumer behavior, said Simon Zhen, senior research analyst at MyBankTracker.com. Savings accounts typically offer higher rates than checking accounts because they are designed for money to remain there and grow. If the distinction between a savings account and a checking account is eliminated, consumers may have less reason to use checking accounts, and banks may have less incentive to offer better rates on savings accounts.

“If you take the limit away, what’s the difference between a saving account and a checking account?” Mr. Zhen asked.

Here are some questions and answers about savings account fees:

How can I avoid excessive savings withdrawal fees?

Set up text or email alerts to notify you when you are approaching the account’s limit. You can also consider using a line of credit, rather than linking your checking account to your savings account, to cover any overdrafts and reduce unnecessary transfers.

Also, savings withdrawal limits apply to the number of transactions, not the amount. If you know you’ll be needing some cash from your savings account, consider making one or two larger withdrawals instead of several smaller ones, said Greg McBride, chief financial analyst at Bankrate.com. (Separately, some accounts may limit the total amount of cash that can be withdrawn or transferred in a single transaction.)

What are current interest rates paid on savings accounts?

Even on “high yield” accounts at online banks, which typically pay higher rates because they have no branch network to maintain, annual percentage yields hover around 0.40 or 0.50 percent — far below what those accounts typically paid a year ago. Still, that’s better than the average savings account rate of 0.14 percent, according to DepositRates.

What if I need to withdraw money in excess of my account’s transaction limits?

Contact your bank to discuss your situation and ask for a waiver of the fee, Mr. McBride said. Banks are likely to be flexible, given the continued economic fallout of the pandemic.

Let's block ads! (Why?)



"Give" - Google News
April 30, 2021 at 08:00PM
https://ift.tt/2QJktgX

Banks Were Allowed to Give People More Access to Savings in the Pandemic - The New York Times
"Give" - Google News
https://ift.tt/2YqGX80
https://ift.tt/2YquBwx

Bagikan Berita Ini

0 Response to "Banks Were Allowed to Give People More Access to Savings in the Pandemic - The New York Times"

Post a Comment

Powered by Blogger.