Regulation D Explained: How it Impacts Your Withdrawal Limits

Regulation D Explained: How it Impacts Your Withdrawal Limits

Regulation D limits the number of withdrawals you can make from your savings account to six per month. If you exceed the cap of six transactions, you’ll get hit with a fee or even have your account shut down.

For context, Regulation D is a Federal Reserve banking rule that specifies how much money financial institutions need to keep on hand compared to the total amount they owe to their depositors. That may seem like a concern separate from your day-to-day banking experience, but it blows back on consumers in the form of savings withdrawal limits.

How does Regulation D affect my bank accounts?

One way the Fed ensures that banks meet this requirement and control their reserves is by limiting withdrawals from savings accounts. So while you can make as many transactions as you want with your “demand” accounts — such as your checking account — banks restrict how often you can withdraw from your savings accounts. This also encourages you to use your savings accounts as intended: to save money, not to spend it.

Regulation D is a safety valve for financial institutions. It ensures that they have enough money at any given time to cover depositors’ requests for fund withdrawals. The Federal Reserve requires banks and credit unions to hold at least 3% of their total assets over $16.3 million and 10% of everything over $124.2 million.

What bank accounts does regulation D apply to?

Regulation D covers savings deposit accounts, including conventional savings accounts, high-yield savings accounts, and money market accounts.

Under Regulation D, certain types of transactions from savings deposit accounts are limited, meaning you can only make six per statement cycle. These are generally transactions that are “convenient” — i.e., easy for you — such as online transfers that you can make from your mobile device while sitting on your couch. Other less convenient transactions that require a little more work on your part are unlimited.

It’s important to note that you can’t exceed this cap without consequences. Depending on your bank’s specific policies, you could be charged a fee for each additional transaction — and some banks will even shut your account and transfer your funds elsewhere.

Which transactions are limited by Regulation D?

The Federal Reserve considers the following types of transactions to be convenient and limits you to six per month:

  • Pre-authorized automatic transfers, including automated bill payments and overdraft protection
  • Online transfers to other accounts, including your checking account
  • Transactions and withdrawals requested by phone, fax or email
  • Checks cut from your savings account to third parties
  • Debit card transactions

Banks handle Regulation D penalties in different ways. Some charge fees ranging from $2 to $15, while others offer a few warnings first or simply close accounts that have excess transfers. In general, though, you can expect consequences for continuously breaking the rules.

For example, Chase charges a savings withdrawal limit fee for every transaction over your allowed six during a single statement period. Capital One doesn’t have a per-transaction fee, but the bank may close your account or transfer your money to another account if you’re a repeat offender. Bank of America does both: You’ll get hit with a $10 fee for every withdrawal past your limit, and the bank will convert your savings account into a checking account if you make this a habit.

How to get around your withdrawal limit With Regulation D

There are ways you can get around Regulation D penalties and, in some cases, even exceed the six-transaction limit.

What transactions are not limited by Regulation D?

Certain types of transactions aren’t subject to the six-withdrawal cap on your savings account. These include:

  • ATM transactions
  • Withdrawals or transactions made in person at a bank branch
  • Transactions made by mail
  • Withdrawals made over the phone and if funds are withdrawn by check and mailed to you

If you have a lot of money in your savings account — for example $15,000 at Chase and $20,000 at Bank of America — your bank may waive the six-transaction withdrawal limit and penalty fee altogether.

There are a few other ways to avoid these penalties if you don’t have the funds meet a high minimum balance requirement:

Visit your bank or credit union in person or find an ATM

Transactions made in person at brick-and-mortar branches or at ATMs don’t count toward your limit. Note that not all savings accounts and money market accounts offer debit cards.

Look at your budget and plan ahead

Make fewer withdrawals in larger amounts instead of smaller, more frequent transactions.

Use your checking account to pay your bills

Automatic bill payments count against your withdrawal limit, so schedule those transactions from your checking account instead. If you need funds from your savings to cover your bills, try to make a single large transfer each month.

Set up low balance alerts

Enable alerts for when your checking account hits the minimum amount you’re comfortable with without risking overdraft. Once you receive an alert, you can make a larger transfer from your savings to cover ongoing needs. This will also help you better understand your spending habits so you can avoid overdrafts completely.

Skip overdraft protection altogether

Opt out of this feature to avoid excess transaction fees and other penalties on your savings account. Checking overdraft fees can be much higher and add up quickly, though, so weigh out how much it’ll cost you to penalize each account.

Look for the most flexible account options your bank offers

If you expect to make a lot of transactions, a checking account is probably a better fit for you. If you need a savings account and aren’t tied to any particular bank, compare rules and fees in case you do occasionally need to make more than six withdrawals.

Withdraw from your savings account only as needed

Treat your account like a vault where you’re growing funds for big expenses or long-term goals, not your daily coffee or weekly tank of gas.

With thoughtful planning and the right types of accounts for your financial needs, you can bank freely and avoid penalties associated with Regulation D.