Withdrawal

A withdrawal is the act of taking money out of an account. In everyday banking it usually means taking cash from a bank account, either over the counter at a bank branch or from a cash machine. More broadly, it covers any movement that reduces the balance, such as moving savings into a current account or drawing money out of a pension.

A withdrawal is the opposite of a deposit. It is governed by the account's terms: daily limits, notice periods on some savings products, fees, and penalties for taking money out of fixed-term products early. In retirement saving, withdrawals carry their own tax rules.

Putting money in a bank is like leaving your coat in a cloakroom. A withdrawal is asking for the coat back. Usually you can have it whenever you like, but some cloakrooms have rules: you might need your ticket (a card and PIN), you might only be allowed a certain number of coats a day, or, for a long-term locker, you may have to give notice or pay a small charge to open it early.

The bank does not keep your exact banknotes in a box with your name on it. It promises to pay you back on request, which is why the rules on how and when you can withdraw matter so much.

• At the counter. A customer shows identification or a card and asks a cashier for cash, or presents a withdrawal slip. Large cash amounts may need notice so the branch can order the notes.
• At a machine. With a debit card and a PIN, customers draw cash from an automated teller machine (ATM), the US term for what the British call a cash machine. Some banks also allow card-free withdrawals using a code sent to a phone.
• By cheque. A customer can write a cheque payable to themselves, known as "cash" or "self" cheques in some countries, and cash it at their branch.
• At shops and agents. Cashback at the till, post office counters and banking agents let customers withdraw cash where branches are scarce.
• Electronically. Moving money from a savings or investment account to another account is also a withdrawal, even though no notes change hands.

Banks set daily cash withdrawal limits on cards to limit losses from theft and fraud; the limit appears in the account terms and can often be changed on request. Using another bank's machine, or a machine abroad, can bring bank charges and currency conversion fees. Withdrawing more than the available balance may push the account into an overdraft or simply be declined.

Large cash withdrawals also attract regulatory attention. In the United States, banks report cash transactions above $10,000 in a business day on a currency transaction report. Pakistan has for years levied an advance withholding tax on large cash withdrawals by people who are not on the tax authority's active taxpayer list, to encourage people to file returns and use non-cash payments.

Instant-access savings accounts allow withdrawals at any time, though some products pay a bonus only if the customer makes few or none. Notice accounts require the customer to warn the bank, for example 30 or 90 days ahead, or lose interest on the amount withdrawn.

Fixed-term products such as fixed deposits and certificates of deposit (CDs) lock money away for a set term in return for a higher rate. Breaking the term early, where allowed at all, usually costs an early-withdrawal penalty, typically expressed as a number of months' interest.

In the United States, the Federal Reserve's Regulation D used to limit savings accounts to six "convenient" transfers and withdrawals a month. In April 2020 the Fed removed that limit, although many banks still apply their own caps.

When very many depositors try to withdraw at once because they fear a bank will fail, the result is a bank run. Deposit insurance and central bank lending exist largely to stop such runs.

Withdrawals from retirement savings are restricted by age and taxed in specific ways, because governments give tax relief on the way in. In the United States, money taken from an IRA or 401(k) plan before age 59½ is generally subject to a 10% additional tax on top of income tax, unless an exception applies. In the United Kingdom, private pension savings can normally be accessed from age 55, rising to 57 from April 2028, and part can usually be taken tax-free. Money held in pension funds is meant to provide income for life, so withdrawing too much too early is a common planning risk.

• Internal Revenue Service: Retirement topics, exceptions to tax on early distributions
• Federal Reserve Board: Regulations listing