Because of the coronavirus’s economic impact – layoffs, wage cuts, and decreased company income – Americans’ budgets could be tightening. That means you can need to take money out of your savings account to cover living expenses or pay bills.
However, Federal Regulation D governs your savings account operation. Regulation D requires banks to follow and restrict the number of times customers can withdraw money from their savings accounts each month.
Customers who go over their allotment are usually charged a fee, but some banks and credit unions waive the payment during this crisis.
What Is Regulation D?
The Federal Reserve Regulation D, which went into effect in 2008 during the Great Recession, is part of a regulatory system intended to preserve financial stability.
According to Eileen Grogan, assistant vice president of payment solutions at Affinity Federal Credit Union in Basking Ridge, New Jersey, this provision restricts some deposits and withdrawals from a savings or money market account to six transactions per month to ensure the financial institution has sufficient reserves.
Another explanation for the regulation, according to her, is to avoid savings accounts from being used in the same way as checking accounts.
According to Grogan, the rule also encourages “savings accounts to be used for what they were intended – to save money.”
Regulation D sets a limit on the number of transactions that can be completed without needing to travel to a branch or use an ATM. The number of electronic transactions a person may make is limited by law.
These acts add up to the maximum of six:
- Preauthorized, automatic transactions, including those from savings, account for overdraft protection or bill payments.
- Telephone transfers.
- Transfers/withdrawals are made by check, debit card, or another similar method.
- Online and mobile banking transactions.
- Payment services such as Zelle.
However, these actions do not count toward the six:
- Transactions made with a teller at the bank.
- Withdrawals or transfers via an ATM.
- Withdrawals via phone if the bank mails you a check.
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What Happens if You Exceed Regulation D’s Limits?
If you withdraw money from your savings account more than six times, most banks charge a small fee on each withdrawal that exceeds the cap. Chase will charge $5, Bank of America, Capital One, and Ally Bank will charge $10, and Wells Fargo will charge $15. Citibank or Discover Bank does not charge fees.
If this happens frequently, banks can refuse your transaction, convert your savings account to a checking account, or close your account.
According to Anand Talwar, deposits and consumer strategy executive at Ally Bank, customers who make more than six withdrawals per statement period from their savings or money market account will be exempt from the $10 charge until July 18.
He claims that this decision will “assist our customers in better weathering these turbulent economic times.”
Check Holds: What You Need to Know
Your bank may make you wait before funds from a deposit are available.
Read: Your Bank Could Take Some of Your Stimulus Check
Plan so That You Can Avoid Regulation D Penalties
Planning ahead of time will help you avoid paying Regulation D fees. Calculate how much money you’ll need to pay your rent or mortgage, car loan, and other recurring monthly bills like cellphone, cable, and utility bills. Make a more significant move from your savings to your checking account after that.
“For daily spending needs, use a checking account as your primary transaction account,” says Stacy Kika, assistant vice president, corporate communications at Wells Fargo.
Keep track of your balance by calling, checking online, or using a mobile app if you rely on overdraft insurance to cover the balance in your checking account.
If you’ve already used up your monthly withdrawal/transfer cap but need more money from your savings account, try one of the following options: Go to your local branch, which you can probably do through drive-thru these days, or use an ATM.
If your company offers it, sign up for a direct deposit. According to Grogan, set up a scheduled transfer of funds from checking to savings and have your direct deposit go to your checking account.
Avoid paying bills from either this account or a savings account, although most money market accounts allow you to write checks.