Debit cards rarely make consistent sense for a savings account. It makes far more sense to treat your savings account as a place for saving money, not spending it.
It's common to have a debit card for a checking account, but not for a savings account.
Given how easy it is to access your funds with a debit card, you may wonder why your bank doesn't automatically issue one for your savings account too.
The reason has to do with the differences between checking and savings accounts and why you put money in a savings account in the first place.
However, there's another important distinction to make: The terms "debit card" and "ATM card" are often used interchangeably, and this may cause some of the confusion.
What is a Debit Card?
You are likely to receive a debit card when you open a checking account. It is designed to facilitate many of the transactions you can make in that account. It can be used to make deposits or withdrawals at an ATM, which is probably why most people think a debit card and an ATM card are the same thing.
However, only debit cards carry the Visa or MasterCard logo and allow you to make purchases through those networks just like you would use a credit card. But unlike a credit card, a debit card is linked directly to your checking account and purchases are deducted immediately from your balance the same as a check or cash.
ATM cards, on the other hand, are less common. They can only be used for making deposits or withdrawals at the bank or credit union's own automatic teller machines, or ATMs. You cannot make purchases with an ATM card because they do not bear the Visa or MasterCard logo and are not part of those payment system networks.
How Checking and Savings Accounts Differ
There are many kinds of credit union and bank accounts, each tailored for specific needs and purposes.
Checking and savings accounts are the most common because they spearhead the two main groups of products and services offered by financial institutions: transactional accounts and savings accounts.
Transactional accounts are set up to allow you to conduct your financial business quickly and efficiently.
Banks and credit unions expect frequent transactions on these accounts - customers may write checks on a daily basis and make deposits often too, so they typically come with debit cards that facilitate the volume and give easy access to your money either at an ATM, online, or at a merchant to purchase products or services.
As a matter of fact, debit cards have become so integral with checking accounts that in some countries checking accounts no longer have checks, only debit cards.
Transactional accounts are expensive to maintain, so they usually come with fees such as fees for checks, monthly maintenance fees, fees for overdrafts or out-of-network ATM use. The fees are how banks and credit unions receive compensation for their administrative costs associated with maintaining records for the higher volume of transactions.
Another reason for fees on checking accounts is because banks cannot count on the money staying in their checking accounts consistently. This causes them to keep more money in reserve, which means they have less to lend out -- their biggest source of profit.
In contrast to transactional accounts, banks and credit unions offer various kinds of savings products, from traditional savings accounts to fixed deposits, CDs and money market accounts. The primary purpose of these accounts is to encourage consumers to save money, which leads to significant differences between checking and savings accounts.
- Savings accounts generally pay a higher interest rate
Although some banks advertise their checking accounts as paying interest, you find most of the time that savings accounts pay a higher interest rate.
Furthermore, when you research your options for savings accounts or money market accounts, you'll discover online banks tend to offer higher interest rates than brick-and-mortar banks because they don't have the expenses associated with maintaining those brick-and-mortar branches.
- Savings accounts generally have fewer fees
The second difference is that savings accounts generally have no fees or fewer fees, because their lower transaction volume reduces the costs to the bank, and their more stable balances permit the financial institutions to lend a higher percentage of those balances.
- Savings accounts are subject to Regulation D
The Federal Reserve put in place Regulation D, which puts limits on some withdrawals made from a savings account. This rule, also known as Reg D, imposes a limit of six transactions per month per account affecting certain deposits and withdrawals to or from your savings or money market account.
When you go over the six-transaction limit, the bank or credit union can charge you a fee, close your account or convert your savings account into a checking account. (Checking accounts, as transactional accounts, do not have any transaction limits.)
The purpose of Regulation D is to ensure that banks maintain the proper amount of reserves on hand, but also to encourage people to use savings accounts for their intended purpose: to save money.
There are a few exceptions to the six-transaction limit. Withdrawals at an ATM or in person at a branch are not included. Also excluded are check withdrawals if the check is mailed to you as the depositor.
But the message is clear: the Fed doesn't want you to treat your savings account like a transactional account. Which brings us back to the original question: Can you get a debit card on a savings account?
A Debit Card on a Savings Account
Having explained the differences between checking and savings accounts, it is easy to see why debit cards are common on checking accounts. However, because a savings account is one of the products and services designed by financial institutions to encourage and make it easy for you to save, it is subject to the federal Reg D, which imposes a limit of six transactions per month. Therefore, you can see there is less need for a debit card on a savings account.
Not having a debit card on a savings account is not a terrible hardship, though.
It is easy to transfer money from your savings to your checking account on your computer or phone. When you are in a store to make that purchase you've been saving for, it's easy to quickly transfer the exact amount from your savings account to your checking account while you're waiting for the clerk to initiate the sale.
That said, several banks do offer a debit card on their savings accounts.
Is a Debit Card on a Savings Account Wise?
The fact that something is possible doesn't always mean it is good for you.
While it's easy to use a debit card on a savings account, most people (except for the most disciplined) would be tempted to use it.
Then too, if you happen to have a debit card for both your checking and savings accounts, it might also be easy to pick the wrong one out of your wallet, and next thing you know your savings account has dwindled and your checking account has more in it than you expected.
Debit cards are for spending money, not saving it. Therefore, they are not a natural match for savings accounts.
Make no mistake: there are times when having a debit card on your savings account could be convenient. There may be times when you want to make a purchase, especially a big one you might have been saving for, and it may feel awkward to do the transfer of money from your savings to your checking account right there in the store. Your internet connection may not work inside the store or the bank's website may be slow at the very moment you need it. For those cases, having a debit card on your savings account may be more than just a convenience. You can step up to the cash register and get the transaction done lickety split.
Another reason someone may be tempted to use a savings account as a transactional account is to avoid checking account fees. That might be a legitimate concern, but even some cursory research shows there are enough banks and credit unions that offer free checking with minimal restrictions.
In general, though, debit cards rarely make consistent sense for a savings account. Six transactions a month is not many, and with a debit card burning a hole in one's wallet, that limit of six transactions is not hard to reach, and breach, triggering any number of Reg D sanctions. Your bank may just slap you with fees, but they may also close the savings account or convert it to a checking account. Some may let a single instance slide, but repeated violations will bring on stiffer sanctions.
Why risk that? It makes far more sense to treat your savings account as a place for saving money, not spending it. It's the reason the Fed set up savings account as different from transactional accounts like a checking account. And isn't saving money the very reason you opened a savings account in the first place?