If you’ve ever been locked out of your account or charged a fine for making too many withdrawals, you’re not alone. Many Americans don’t know that their savings accounts come with built-in restrictions on how often they’re allowed to make transfers and withdrawals; many of these restrictions fall under what’s known as “Regulation D.”
How Does Regulation D Work?
Regulation D is a federal rule from the Federal Reserve Board, an independent government agency known colloquially as “The Fed,” that limits you to six “convenient” transfers or withdrawals per month from your savings account or money market account.
Savings accounts and money market accounts are subject to different rules than other accounts, such as checking accounts and certificates of deposit. For example, checking accounts, also known as “transaction accounts,” are designed to handle frequent inflows and outflows, while savings accounts are meant for cash accumulation.
Delineating the different types of accounts helps banks manage their own funds. Banks operate under a fractional reserve system in which they must keep a certain percentage of money on reserve (either in the vault or in a Federal Reserve bank account) and not use it for the institution’s other practices, such as home mortgages and consumer loans.
Banks require 10% of checking account deposits to be held on reserve, with the understanding that funds will flow in and out of checking accounts more frequently. This 10% rule is a hedge against the risk that constant transactions pose to banks. On the other hand, banks are not required to keep any cash from savings accounts on reserve, as savings accounts are considered less risky. The transaction limits imposed by Regulation D help enforce that low level of risk.
Which transactions fall under Regulation D?
Regulation D applies to transactions made from savings accounts and money market accounts, such as:
- Transfers and withdrawals initiated online (website, mobile app, or payment service, such as Zelle and Venmo)
- Transfers and withdrawals by telephone (unlimited if the withdrawal is disbursed via check mailed to the depositor)
- Transfers and withdrawals by fax
- Transfers from those accounts to another account (whether at the same bank/credit union or a different institution)
- Pre-authorized automatic transfers, such as bill payments and overdraft protection
- Debit card purchases and transfers
- Withdrawals by check to a third party
- Outgoing wire transfers
Some banks will impose stricter rules on transactions than what is outlined by Regulation D, so consult with your institution’s terms and conditions or customer service with any questions.
Which transactions don’t fall under Regulation D?
Regulation D does not cover:
- Cash deposits into savings and money market accounts
- ATM withdrawals and transfers
- Transactions made in person at the bank
- Transfers made by mail
- Withdrawals initiated by telephone, if the withdrawal is disbursed via check mailed to the depositor
What happens if I go over the limit?
If you make more than six “convenient” transfers from your savings or money market account per month, the bank has the right to:
- Charge a fee for “excessive transactions” (for example, Ally Bank charges $10 per excessive transaction over the six that are covered)
- Close the account
- Convert the account into a checking account, which has no transaction limit
How Do I Get Around Regulation D?
To get around the six-transaction limit imposed by Regulation D, you can make transfers and withdrawals from one of the less convenient methods to which the rule doesn’t apply, like going to a bank’s physical branch or handling transfers and withdrawals at an ATM.
You can also change the way you manage your money so that you don’t risk hitting the limit each month. Below are four ideas for how you can manage your savings and money market accounts.
Lump all of your transactions together
In other words, make fewer, but bigger, transfers. If you find yourself making multiple transfers per month from your savings account to your checking account, try consolidating those transactions as much as possible. Otherwise, you could incur a fine from your bank or credit union.
Make transfers to your checking account
Instead of linking an Automatic Clearing House (ACH) automatic transfer to your savings account, try setting it up with your checking account instead, since it’s not subject to the limitations of Regulation D. This includes recurring bill payments and transfers from services like Zelle and Venmo.
Transfers that occur because of an overdraft protection program count toward the six maximum transactions. Because these transfers from a savings account to a checking account occur automatically, you’ll want to avoid getting close to $0 in your checking account. You can set up additional measures to protect yourself, such as low-balance alerts to your email and phone, or you can turn off overdraft protection entirely.
Get friendly with your local bank tellers
If you find that the methods above aren’t keeping you from hitting the monthly transaction limit, you may need to do more banking IRL. Work with a bank or credit union that has local branches and incorporate those errands into your routine. Some of our top picks for the best online banks, such as Capital One and Discover, have brick-and-mortar locations that offer face-to-face customer service without skimping on the high interest rates that their competitors offer.