You’ve made some money by stashing funds in a high-yield savings account, and now you want to cash in to make a down payment on a home.
High-yield savings accounts are having a moment. With the federal-funds rate in the range of 5% to 5.25%, consumers can earn an annual return of up to 5% on their deposits on these accounts, which are most commonly offered by online banks.
Financial advisers often recommend high-yield savings accounts as a safe way to grow money for short-term goals such as building up an emergency fund or saving for a major purchase. The accounts also appeal to consumers by offering them easier access to their money than they would get with an investment like a certificate of deposit.
But getting access to those funds is sometimes not so easy.
How long does it take to withdraw money? And what can cause a delay?
A warning for consumers who may need their cash in a hurry: Savings accounts, including high-yield accounts, are actually designed to discourage frequent transactions and often have monthly limits on the number of withdrawals.
JPMorgan Chase
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for example, notes on its website that customers who exceed those limits may be charged a fee, or their account could be reclassified as a checking account or even closed by the bank.
Prior to April 2020, federal regulation limited transfers or withdrawals from savings accounts at U.S. banks to six per month to ensure that banks had adequate reserves to cover customer withdrawals.
Even after the Federal Reserve relaxed the rule, some banks kept the limit and the related penalties. In May 2023, 43 out of 67 banks reviewed by Bankrate still imposed some sort of limit on the number of withdrawals.
Withdrawing money from an online savings account usually takes one to two business days, depending on the bank and also on the time of day the withdrawal request is made, said Sara Kalsman, a financial planner with digital-investment company Betterment.
“Savings accounts, including high-yield accounts, are actually designed to discourage frequent transactions and often have monthly limits on the number of withdrawals.”
But if a customer wants to withdraw funds shortly after making a deposit into their account, it could trigger a temporary hold, she said.
That’s because such a transaction may be flagged by a bank as suspicious, said Ken Tumin, a senior industry analyst at LendingTree and the founder of Deposit Accounts, a bank-deal-comparison website owned by Lending Tree. “Any suspicious activities could cause the bank to freeze your account, and that would delay outgoing transfers,” he said.
But how long is long enough to wait? It’s hard to know for sure, Tumin said, because banks usually don’t divulge how they classify suspicious activity. “Definitely within the first month, use caution,” he said, but added that customers might need to wait even longer than that.
Banks also look at account history to determine whether an activity appears suspicious, Tumin said. Banks bear liability when unauthorized fund transfers are initiated with them, and that’s part of the reason they are cautious.
Large sums of money may take longer to withdraw
For similar reasons, it usually takes longer to transfer a large sum of money than a small one, and there are different limits for withdrawing money than for depositing money into an account, Tumin said.
At Valley Direct, a bank that offers interest rates of up to 4.85% on saving accounts, for example, the daily limit for depositing money into a high-yield savings account is $45,000 and the monthly limit is $75,000, while the limits for withdrawals are $3,500 per day and $12,500 per month.
A Valley spokesperson said the limits are a safety measure to protect against fraud, and that they may vary depending on a customer’s relationship with the bank. Valley’s high-yield savings accounts can only be opened and managed online.
Some banks clearly disclose their deposit and withdrawal limits, but industry experts say there is often a lack of clear information. Delays in withdrawing or transferring funds can be very frustrating for people who are constantly chasing the highest interest rates and who want to move their money into and out of accounts quickly, Tumin said.
“Delays in withdrawing or transferring funds from high-yield savings accounts can be very frustrating for people who are constantly chasing the highest interest rates.”
It can also spell trouble for those who need their money to pay bills. The Wall Street Journal recently reported that a man had to sell $12,000 worth of stocks after he was unable to transfer $10,000 from his Apple Savings account to cover the bills for a basement remodel. Goldman Sachs, the bank behind the Apple Savings product, told the man that his account was under a security review.
In its deposit account agreement for the Apple Savings account, Goldman Sachs
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said it reserves the right to require customers to notify the bank in writing seven days before a withdrawal is made from their account. The bank may also place limits on the amount of funds that can be transferred based on the amount or frequency of transfers, and said it will disclose the limits to customers at the time they schedule a transfer.
“While the vast majority of customers see no delays in transferring their funds, in a limited number of cases, a user may experience a delayed transfer due to processes in place designed to help protect their accounts,” a Goldman Sachs spokesperson said.
How can customers prepare for potential delays?
“High-yield savings accounts are great vehicles for your emergency fund or upcoming major purchases,” Kalsman said. But she cautioned that when moving funds into a high-yield savings account, people should make sure they leave enough funds in their checking account to cover four to six weeks’ worth of expenses. This will help them avoid overdraft fees and issues caused by transfer-processing delays, she added.
Before initiating a transfer, it’s always a good idea to check with the bank’s customer-service department to learn about any restrictions and limits, Tumin said. Limits on the size of transfers typically apply only to transfers initiated from a bank’s online platform, he added, but many traditional banks also have various limitations with their own electronic-funds-transfer service.
Meanwhile, customers who find themselves unable to access their funds should contact their bank’s customer-service department as soon as possible, but they should be aware that there may be little bank representatives can do immediately about a delay or an account that has been frozen, experts said.
But such delays are also designed to protect the customer, Tumin said, adding that this familiar aphorism perfectly illustrates the conundrum: “An ounce of prevention is worth a pound of cure.”