In this article:
- Why It’s Difficult to Pay Your Bills With a Savings Account
- 3 Ways to Simplify Bill Paying
- Pay Bills the Smart Way
Typically, you can't pay bills from a savings account. Savings accounts are for long-term storage, not short-term repeat transactions. They do not have an associated debit card or checkbook you can use to make purchases.
But sometimes the end of the month comes faster than expected and the balance in your checking account may not be enough to cover your expenses. If time is of the essence, it may be possible to pay a bill from your savings account—but there are a few reasons it's not recommended.
Why It's Difficult to Pay Your Bills With a Savings Account
Because savings accounts are for long-term saving and not day-to-day transactions, the money within them isn't as accessible. Unlike checking accounts, savings accounts don't come with checkbooks or debit cards. Usually, you withdraw cash from a savings account in person at your bank or with a cashier's check, or transfer money from your savings account to your checking account.
Savings accounts may also have transfer limits. Until April 24, 2020, under Regulation D from the Federal Reserve, most savings accounts had a limit of six transactions a month. This restriction was changed to permit easier access to accounts during the pandemic, but some may still charge fees if account holders make more than six transfers. Clarify with your bank if there are transfer restrictions on your savings account if you're unsure. If your bank does impose transfer limits, paying recurring monthly bills from a savings account is a bad idea. You will quickly max out the available number of transfers for rent, electricity, fuel, cellphone, internet and other bills.
If you do need to pay an occasional bill from a savings account, it's not as simple as writing a check from your checking account. To pay bills from a savings account, you must provide your account information—including routing and savings account numbers—to the payee. They will then remove the money from your account. While this should process without a problem, it does give an external party access to your account. This could lead to further issues such as incorrect withdrawal amounts. There are safer and more convenient ways to make payments.
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3 Ways to Simplify Bill Paying
To simplify your bill payments and avoid maxing out your monthly savings account withdrawals, it's better to pay your bills using one of the following payment methods.
1. Pay With a Checking Account
Using a checking account is a common method for paying bills. These accounts are often fee-free, and you can set up electronic bill pay options to have the amount owed automatically withdrawn from your checking account on or before the due dates.
When paying with a checking account, you'll need to make sure your account has an adequate balance before your due dates arrive. You could do this by manually transferring money from your savings to your checking account before bills are due or by setting up an automatic transfer from your savings account. Bounced payments or overdraft fees can result if you don't have enough money in your account.
2. Pay With a Credit Card
You can also pay bills with a credit card. Some people prefer to do this because they can autopay all their bills from their credit card and never miss a payment. If you do this, you can manually pay your credit card just once a month or even autopay that as well. Not only does this simplify the process, but it allows you to access credit card perks like cash back and fraud protections.
3. Use a Prepaid Card
Prepaid cards are another way to schedule automatic payments. You can add money to your prepaid debit card with cash or a paycheck. You can use them online or in person to pay bills like you would with a checking account. They do, however, often come with fees for use.
Pay Bills the Smart Way
Whatever option you choose, automating bill pay makes sure that you never miss a payment. Your payment history accounts for a big segment of your credit score—35% of your FICO® Score☉ —so you'll want to take all possible steps to make sure these bills get paid.
You can also get credit for bills that don't normally appear on your credit report when you use Experian Boost®ø. This free service reports your on-time payment for things like your cellphone bill, home utilities and even your monthly Netflix® subscription, often giving your FICO® Score a boost. Automate these payments with your checking account to make sure you never miss a payment.
