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Regulation D and savings account withdrawal limits – here’s what changed

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Banks historically limited the number of transactions customers can make each month in savings and money market accounts, the result of Regulation D, a Federal Reserve Board rule that limited withdrawals and transfers to six each statement cycle.

But the Fed removed the limit in April 2020 to provide consumers increased access to funds they might need to navigate the economic fallout from the coronavirus pandemic. The Fed’s revision of Reg. D allowed banks to suspend enforcing the six transfer or withdrawal limit.

Still, many banks have maintained the six-transaction limit, while others have increased the number of withdrawals and transfer permitted. American Express National Bank, for example, now allows up to nine withdrawals or transfers a month.

The Fed’s move was termed an interim final rule, which is issued when there’s good cause to skip issuing a proposed rule, says Scott Birrenkott, assistant director of legal at the Wisconsin Bankers Association.

Still, the proposal isn’t yet set in stone.

“The Fed still hasn’t issued a final rule,” Birrenkott says. “So, some banks are still waiting for that final piece to kind of see. I know that some banks are curious whether that might change or something might be reversed, because it can be a big step to adjust all of their policies and procedures.”

Transaction accounts vs. nontransaction accounts

Checking accounts are designated transaction accounts under Reg. D, meaning their purpose is for conducting day-to-day business — bill paying, making purchases, etc. Reg. D places no limit on the number of transactions that can be made with checking accounts. Savings and money market accounts, known collectively as savings deposit accounts, are termed nontransaction accounts under Reg. D, meaning their purpose is for saving money.

Prior to April 24, 2020, Reg. D required banks to limit the number of transfers or withdrawals from savings deposit accounts, a term that includes both savings accounts and money market accounts, to six — and some banks still impose that limit.

Checking accounts generally don’t have withdrawal limitations because they’re meant to be used for many transactions. Savings and money market accounts, meanwhile, are traditionally meant for saving money and not for daily transactions.

Here are some examples of transactions on money market accounts and savings accounts that were limited under Reg. D:

  • Withdrawals by official bank check
  • Outgoing wire transfers
  • Debit card purchases (likely only for money market accounts)
  • Withdrawals or transfers via an automated clearing house service to pay a bill or a person or a withdrawal with a payment service such as Zelle
  • Withdrawals or transfers made with a savings deposit account acting as overdraft protection for a checking account

The purpose of Reg. D

Reg. D limits were meant to help banks maintain reserve requirements, one of the Federal Reserve’s monetary policy tools.

Reg. D requires banks to meet reserve requirements by holding cash either in their vaults or by maintaining the appropriate balance in a Federal Reserve Bank account. It classifies types of accounts and sets rules for calculating a bank’s reserve requirements. These reserve requirements apply to certain types of deposits and other liabilities that depository institutions have, according to the Federal Register. For instance, savings deposits aren’t subject to reserve requirements. But transaction accounts are subject to reserve requirement ratios.

“Very generally speaking, banks make money by taking money in for deposit and then lending it out,” Birrenkott says. “However, banks cannot lend out every penny that they have on deposit, as deposit customers need to access some of their funds on deposit at the bank. Reserves must be kept for the transactions that occur each day. These reserves requirements are based upon the Fed’s monetary policy.”

The run-on-the-bank scene in the movie “It’s a Wonderful Life” is an example Birrenkott cites to explain the need for reserve requirements.

Unlike savings accounts, checking accounts don’t reserve the right to require at least seven days’ written notice for a withdrawal.

Exceptions to Reg. D restrictions

There are some withdrawals and transfers that are unlimited — and were unlimited before the April 2020 amendment. ATM withdrawals and withdrawals made through a bank teller at a bank branch don’t count toward the six transfers or withdrawal limits each statement cycle. Some savings accounts and money market accounts allow you to get an ATM card or a debit card for ATM access.

Why it pays to know about Reg. D

It’s important to know the limits banks impose on withdrawals and transfers when shopping for a new savings or money market account. A savings account might not be the right account for you if you plan to transfer money frequently between accounts.

Some banks may restrict monthly withdrawals to less than 6

Changes in 2009 made Reg. D more consumer friendly.

Before these Federal Reserve Board amendments, there was still a limit of six transfers and withdrawals each month. But within the six-transaction limit, no more than three could leave the institution, says Chris Cole, executive vice president and senior regulatory counsel for the Independent Community Bankers of America.

“You’ve got a little more freedom from it,” Cole says. “Everyone was really confused about the difference between an internal withdrawal and an external withdrawal.”

Some banks may still limit this number to less than six. Check with your bank to see if it has any special restrictions on money market or savings accounts.

Written by
Matthew Goldberg
Consumer banking reporter
Matthew Goldberg is a consumer banking reporter at Bankrate. Matthew has been in financial services for more than a decade, in banking and insurance.
Edited by
Wealth editor