Fed Announces Rule Changes for Personal Bank Accounts
Each of us has at least one savings account with a reputed bank for our personal use. These accounts known as savings accounts or personal accounts are used for keeping your money safe and secure. These accounts have certain limitations and guidelines which govern them. Due to the COVID-19 Pandemic the world over, the income of the people has come under severe stress. A lot of people have lost their jobs or have been forced to accept pay cuts. Even big companies are putting their employees on furlough or sending them on sabbaticals. In light of all these issues, the Fed announces rule changes for personal bank accounts.
This reduced income and the reduced amount of money in the people’s hands has affected the liquidity in the economy. A lot of money that lies in savings accounts of people is technically inaccessible because one can make only six transactions per month. These six transactions include withdrawals and transfer of funds. Post these six transactions, the bank will charge you a high fee in case you make further transactions. This deters people from making more than six transactions per month. Hence people save the remaining amount of money left after six transactions and they don’t spend it.
The Rule Change
The COVID-19 pandemic and the associated lockdown has thrown all our lives out of gear. People have lost their sources of income or their income has reduced considerably. This has put a lot of financial stress on people and the economy and it has not gone unnoticed by the Federal Reserve. To alleviate the problems being faced by the country, the Fed announces rule changes for personal bank accounts. This rule change may be small but it is expected to have a huge impact on the people and the economy.
The rule changes for personal bank accounts are that the six-transaction limit on these accounts will be lifted. This change is effective immediately and the bank will not charge you any fee or penalty if you make more than six transactions from your savings account. Thus, you can effectively use your savings account as a checking account and make as many transactions as you require.
The Impact on People
These rule changes for personal bank accounts are set to have a positive impact in your life since you don’t need to limit your transactions any longer. You can transact as many times as you like and this will help you clear any bills or expenses that may suddenly come up. It is also mentally relaxing that there is no limit to the number of transactions since sudden expenses can come up during these trying times.
This move will also allow you to use your savings account as a checking account and give you greater access to your savings. This becomes especially relevant since you make incur sudden medical expense during this pandemic. Moreover, it will give you greater freedom to stock up on supplies in case the country goes into a prolonged lockdown. You must, however, exercise restraint in terms of your spending since the economy may slip into a recession because of the pandemic. All in all, it is a good move for the people that is set to benefit everyone.
Impact on the Economy
With states and cities going into lockdown to flatten the curve of the COVID-19 spread, the economy has been severely hit. With shops and businesses closed, there is no cycling of cash. Products are not being manufactured and the ones already in the inventory are not being sold. With the income levels of people falling, purchasing has become more discretionary and people are only buying essentials. These rule changes for personal bank accounts will allow people to spend more since they are no longer limited to making six transactions.
Thus, the economy will obtain more liquidity since people’s cash reserves will now come into play. People will now be able to spend more freely and this will lead to more purchases by the public. This, in turn, will help the cash reserves flow into the economy and give it a respite from the liquidity crunch.
Impact on Banks
Due to this move, the banks are set to lose out on some revenue. Despite their best attempts and perfect calculations, a lot of people had to perform more than six transactions per month from their personal accounts. Hence the banks earned revenue from these extra transactions. Now, they will not be able to charge the people with a penalty or a fee post their sixth transaction.
This move, however, will increase the number of transactions that are occurring from personal accounts. Thus, the banks and payment gateway partners will earn more in terms of the service fee charged to the customers.
Greater Access to Money
This move will give people greater access to their own money. For a lot of people, salaries will not be coming in or they will be reduced. These people will be particularly benefitted by this move since they will be able to access and spend their savings. Additionally, this will allow people to cover any sudden expenses or medical bills which they might incur due to the pandemic.
It will also give the Federal Reserve greater access to people’s money and get it flowing into the economy. People keep money stored away in savings accounts because it gives them good interest and spending it after six transactions attract a penalty. Now they will be more likely to utilize it and spend it on their needs.
These rule changes that have been announced by the Federal Reserve are a boon for the people and the economy alike. It will allow people to effectively clear their bills and tackle any untimely expenses without attracting any penalties. It will help the economy by tapping into the cash reserves of the people and increasing the liquidity in the markets. Thus, this move is set to bring about an improvement in the current status of the country and help it tide over these trying times.