Federal Reserve Board Regulation D is a federal law that says you can't make more than six withdrawals or transfers per month out of your savings account. The same rules also apply to money market accounts.
You may never have noticed this regulation because you probably try not to touch your savings too often. With any luck, you move money into your savings account more often than you take money out of it. But if you ever have a month where you need to tap your savings more than six times, you might face a penalty. Your bank could decide to charge you a fee or—if you regularly have more than six such transactions a month—your bank could even close your account or turn it into a checking account. This means any subsequent transactions might also be declined. The good news? Certain transactions may be exempt, as we explain below.
- Federal law limits the number of withdrawals or transfers you can make from a savings or money market account at a bank or credit union to six a month.
- If you exceed this limit, your bank may charge you a fee or it could close your savings account and turn it into another type of account, such as a checking account.
- You may be able to get around the limit by using an ATM or bank teller to move your money or by calling the bank and asking it to mail you a check from your savings account.
Reserve Requirements of Depository Institutions
The Federal Reserve Board is an independent government agency. Its seven members are in charge of the U.S. Federal Reserve system, which tries to keep the U.S. economy growing and the financial system stable.
The Federal Reserve Board's Regulation D governs the reserve requirements of depository institutions. Bank reserves are currency deposits that depository institutions keep on hand and do not lend out. This regulation helps the central bank when it comes time to implement its monetary policy.
A depository institution is a place where people keep their money. We often refer to these institutions as commercial banks, savings institutions, or credit unions. These organizations hold your money safely until you need it back. They may pay you interest while holding your money. They may also lend it out to other customers in a way that doesn't prevent you from accessing your money when you need it.
Regulation D and Bank Reserves
Financial institutions satisfy their reserve requirements in two ways. The first is by maintaining a certain amount of money in their own vaults. The second is by keeping a balance at their district's Federal Reserve Bank. A financial institution that fails to meet its reserve requirements may have to pay a reserve deficiency charge to its Federal Reserve Bank. This charge costs one percentage point above the primary credit rate that was borrowed.
Regulation D ensures that banks have enough cash on hand to meet withdrawal requests by limiting how customers are able to use their savings accounts. Although institutions aren't required to keep any reserves for customers' savings account balances, they must keep reserves for transaction accounts—in other words, checking accounts.
How Banks Limit Savings Withdrawals
To comply with Regulation D, your bank doesn't want you to make more than six of these "convenient" types of outgoing transactions from your savings account each month:
- Overdraft transfers
- Electronic funds transfers (EFTs)
- Automated clearing house (ACH) transfers
- Transfers made by phone, fax, computer, or mobile device
- Wire transfers made by phone, fax, computer, or mobile device
- Checks written to a third party
- Debit card transactions
Getting Around the Limit
You can get around this six-transaction limit by making certain transfers and withdrawals that the Federal Reserve says don't count. These are considered inconvenient transactions. If you use an ATM or a bank teller to move your money, it's all good. And if you call the bank and ask it to mail you a check from your savings account, that's also fine.
That said, your bank may decide to impose stricter rules and not exempt these transactions. You'll have to read the terms and conditions of your savings account or ask customer service to see what rules apply to your specific account.
If you might need to make a seventh transaction from your savings account in a month, contact your bank first and ask how you can avoid penalties and fees.
If these rules strike you as illogical, you're not alone. Unfortunately, the first time you learn about these rules might be when you accidentally run afoul of them. If you only violate the rule occasionally, your bank might not penalize you and you might never notice. But if you do face a penalty, here's how to avoid the problem in the future.
How to Avoid Savings Account Withdrawal Problems
Here are five strategies to keep your savings account withdrawals below the maximum and deal with your bank if there's an exception.
- Limit withdrawals to non-monthly bills. You might set aside money each month to pay bills that only come up a few times a year, like homeowners insurance or car repairs.
- Lump your withdrawals. Ideally, you keep a budget that you adjust at the beginning of each month to account for that month's anticipated income and expenses. At the beginning of each month, make your best estimate of how much you might need to withdraw from savings. Or perhaps your income comes from an irregular source and you set money aside in months when you make more money, then dip into savings in months when your income is low. Instead of making several savings withdrawals or transfers throughout the month, try to make just one or two.
- Pay bills from your checking account. Don't use your savings account for this purpose.
- Avoid overdrawing your checking account. Set up mobile alerts that keep you on top of your balance.
- Contact your bank in advance. If you might need to make a seventh transaction from savings, ask how to avoid penalties and fees. Specifically, ask if making an automated teller machine (ATM), in-person, or phone-to-check transfer (as described in the section above) will keep you out of trouble.
How Top Banks Handle Regulation D
While Regulation D provides minimum standards that banks must follow, banks can implement tighter criteria to determine when to charge customers for exceeding the six-transaction limit. Here are the policies of three of the countries' biggest banks.
Even though Regulation D does not limit withdrawals or transfers from a savings account made in person at a branch or at an ATM, Chase charges a $5 Savings Withdrawal Limit fee on all withdrawals or transfers out of savings accounts in excess of six per monthly statement period.
Bank of America
BOA charges $10 for each withdrawal or transfer in excess of six per monthly statement cycle. The bank also caps excess withdrawal or transfer charges to six ($60) per cycle. Customers with a minimum daily balance of at least $20,000 and Preferred Rewards Program members are exempt from these charges.
Wells Fargo charges a $15 excess activity fee with a limit of three ($45) per month for transactions that exceed the limit of six imposed by Regulation D.
The Federal Reserve made some changes to the rules surrounding withdrawals made from savings accounts in light of the global COVID-19 pandemic. As of April 2020, banks are no longer required to uphold the limit, which means that customers can make more than six withdrawals per month from their savings accounts.
The move to implement the interim final rule was made in light of the financial pressures individuals face because of the pandemic. The amendment is open-ended, as the board did not put an end date on the rule. But the committee did say it may make changes if things change in the future.
The Bottom Line
If you are a customer who uses your savings account as intended—mostly to make deposits and accumulate funds—Regulation D's limits should rarely come into play. You can avoid excess transaction fees by making most of your outgoing transfers and withdrawals from your checking account, not your savings account.
In months when you need to make significant withdrawals from your savings account, lumping your transactions together by making one or two larger transfers from savings to checking instead of six or more smaller ones will keep you in your bank's good graces. If you exceed the limit occasionally, the worst thing that will happen is you may end up paying a few fees. If you exceed it too often, however, federal law requires the bank to convert your savings account to a checking account or another type of account.