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Ever wondered why you’re limited to a certain number of withdrawals on your savings account?

You can thank a regulation that treats your savings account and money market account different from your checking account.

Savings accounts and money market accounts are non-transaction accounts, while checking accounts are transaction accounts under Federal Reserve Board Regulation D.

Under this regulation, you can’t make more than six transfers or withdrawals from a savings deposit account per statement cycle. Both savings accounts and money market accounts are considered savings deposits.

Here are some examples of transactions on money market accounts and savings accounts that are limited under Regulation 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 (ACH) 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.

Making too many of these types of withdrawals or transfers from savings deposit accounts can cost you. With the convenience of transferring funds online or through a mobile app from a savings account to a checking account, making six transfers can add up quickly.

The purpose of Regulation D

Regulation D is meant to help banks maintain reserve requirements. Institutions are also required to restrict the number of certain transfers and withdrawals from their savings deposit accounts. Reserve requirements are one of the Federal Reserve’s monetary policy tools, according to the Office of the Comptroller of the Currency.

On a savings account, institutions must reserve the right to require at least seven days’ written notice of a withdrawal, though this is rarely, if ever, exercised according to the Federal Reserve.

Regulation D requires banks to meet reserve requirements by holding cash either in their vault 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.

With a checking account, or demand deposit account, banks don’t reserve the right to require at least seven days’ written notice for a withdrawal.

Exceptions to Regulation D restrictions

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

Being aware of these exceptions together with the limited withdrawals and transfers can help you stay within Regulation D guidelines and choose the account that’s best for you.

Why it pays to know about Regulation D

It’s important to be aware of Regulation D restrictions when opening a savings account or a money market account to make sure the account you’re opening is the right fit for your banking needs. If you think you’ll be transferring money online frequently between a savings account and a checking account, then this might not be the right account for you.

Regulation D violations can cost you both in excessive transfer fees and by potentially having your high-yield savings converted into a transaction account that may not earn interest, after violations.

Some banks may even close your savings account or money market account after a certain number of Regulation D violations, says Chris Cole, executive vice president and senior regulatory counsel for the Independent Community Bankers of America.

“That’s more at the bank’s discretion,” Cole says. “Although I could tell you examiners, if they see it being abused, they will mention it to the bank.”

Some banks charge fees around $10 to $20 for each transaction over the limit.

Banks may restrict withdrawals to fewer than 6

Regulation D has gotten more consumer-friendly since the 2009 changes.

Before these Federal Reserve Board amendments, there was still a limit of six transfers and withdrawals per month. But within this limit of six, no more than three could leave the institution, Cole says.

“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 fewer than six. Check with your bank to see if it has any special restrictions on its money market account or a savings account.

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