As of April 2020, there are no longer any government-mandated withdrawal limits on savings accounts or money market accounts. Regulations imposing such limits were suspended at that time. Previously, provisions in the Federal Reserve’s Regulation D had limited savings account withdrawal transactions. The law stipulated that a savings account could only have six “convenient” withdrawals. Although this limit is no longer mandatory, many financial institutions still enforce the limit for their savings accounts, meaning you could still be charged fees for exceeding the limit.
If you’ve been around long enough, you have probably seen United States banking and financial regulations change time and again. For instance, the Reagan-Thatcher “deregulatory fiesta” of the 1980s would have caught your attention. At that time, many previously imposed regulations on the banking and financial system were relaxed or eliminated.
One thing 1980s deregulation left untouched was the limit on savings-account withdrawals imposed by Regulation D, a Federal Reserve regulation originating in the 1930s. Before April 2020, there was a limit on transfers from any savings account. After modest liberalization of the regulation in 2009, that limit allowed just six “convenient” transfers per month.
This all changed in April 2020, however. At that time, the U.S. government suspended this provision of Regulation D. But removing a mandate is not the same as mandating a removal. Although Regulation D’s limit on savings account withdrawals has been suspended, risk-averse companies are not now obligated to allow unlimited transactions. As a result, many banks and financial institutions continue to impose the same or a similar limit on their account holders.
Why was Regulation D’s savings-account transaction limit suspended?
Some believe that with every crisis comes an opportunity. In line with that thinking, it could be said that the opportunity to end the withdrawal-transactions limit on savings and money market accounts arose from the 2008 financial crisis. How so?
Regulation D’s origin: 1930s crisis
Regulation D’s transaction-limit provisions were created to make sure that banks had sufficient capital reserves via clients’ savings accounts. The purpose was to prevent banks from becoming insolvent during financial turbulence. Since banks are only required to keep a fraction of deposits on hand — hence the description of our financial system as “fractional-reserve banking” — the ability to make unlimited withdrawals was seen as a danger when the limits were established in the 1930s.
Regulation D’s modification and eventual suspension: 2008 crisis and beyond
After the 2008 financial crisis, the Federal Reserve changed the regulations governing banks’ liquidity and capital buffer ratios. This greatly lessened the importance of the Federal Reserve restricting withdrawals from savings accounts by customers. Thus, it was only a matter of time before these regulations would be suspended or disappear. In April 2020, the Federal Reserve announced it was doing away with these Regulation-D transaction limits through an indefinite suspension.
The timing of the suspension was at least partially influenced by the COVID-19 pandemic. The Federal Reserve Board issued its review of the policy in 2019 partly to ease some of the financial burdens of people affected by the pandemic.
What is Regulation D?
Regulation D was meant to make sure that a bank or credit union had a satisfactory amount of banking reserves while in operation. It also required these financial institutions to report reserve (money on hand) balances to the Federal Reserve.
The regulation stipulated that people with savings accounts could only make six “convenient withdrawals” from their accounts per month. As some people use a money market account, the savings account withdrawal limits applied to money market accounts, as well. The six-transaction limit on savings accounts was federal law and not up to the discretion of the bank.
Savings accounts and convenient withdrawals according to Regulation D
“Wait a minute,” you say. “Before you go any further, could you please explain what you mean by ‘convenient withdrawals’ and stop repeating the vague reference with quotation marks around it?”
Yes, we can! Not only can we do that, but we can also explain just what qualifies as a savings account according Regulation D. Or, rather, the Federal Reserve itself can explain. Following are the definitions provided by the Federal Reserve in the “Regulation D: Reserve Requirements” section of its Consumer Compliance Handbook, which see.
Savings accounts according to Regulation D
Thus spake the Federal Reserve:
In order to classify an account as a ‘savings deposit,’ the institution must in its account agreement with the customer reserve the right at any time to require seven days’ advance written notice of an intended withdrawal. In practice, this right is never exercised, but the institution must nevertheless reserve that right in the account agreement. In addition, for an account to be classified as a ‘savings deposit,’ the depositor may make no more than six ‘convenient’ transfers or withdrawals per month from the account. ”
Convenient transfers according to Regulation D
Thus the Federal Research continued speaking:
‘Convenient’ transfers and withdrawals, for purposes of this limit, include preauthorized, automatic transfers (including but not limited to transfers from the savings deposit for overdraft protection or for direct bill payments) and transfers and withdrawals initiated by telephone, facsimile, or computer, and transfers made by check, debit card, or other similar order made by the depositor and payable to third parties. Other, less-convenient types of transfers, such as withdrawals or transfers made in person at the bank, by mail, or by using an ATM, do not count toward the six-per-month limit and do not affect the account’s status as a savings account. Also, a withdrawal request initiated by telephone does not count toward the transfer limit when the withdrawal is disbursed via check mailed to the depositor.”
Limited Transactions under Regulation D
Now that you’ve read the actual words of the Federal Reserve, let’s break it down.
Key convenient transfers that were limited by Regulation D
- Online transfers
- Overdraft transfers
- ACH transfers and domestic wires
- International wires
- Transfers made by phone
- Bill-pay transfers
- Checks written to a third party
- Debit card transactions
However, the Federal Reserve did make exceptions.
Key transfers excepted from the limit by Regulation D
- Withdrawals made at the teller window
- Withdrawals from an ATM
- Transfers from checking to savings at an ATM
- You contacted your bank to have them send you a check
Why did the Fed care so much about limits and reserves?
The Great Depression prompted a wide variety of actions by the U.S. government. Through the Federal Deposit Insurance Corporation (FDIC), it began insuring depositor accounts for amounts up to $250,000. This means that the Fed is effectively on the hook for bank insolvency. Since the federal government’s only source of funds, ultimately, is taxpayers, this insurance effectively spreads risks that any bank will fail among all taxpayers.
Whether this sharing of risks sounds like a good or bad idea to you in principle, government officials of the 1930s saw these kinds of actions as mandatory given the crisis of the time. Whatever they could do to limit bank failures and the catastrophic loss of depositor funds that came with them, they did. Regulation D was one of the actions these crisis-driven officials took.
My bank still limits me. What’s the deal?
Federal regulations and bank behavior are two different animals. Many banks prefer to operate with a risk-averse philosophy. As a result, the specter of Regulation D is still haunting the banking industry (to paraphrase Marx). Some banks still choose to implement their own in-house versions of Regulation D. Bank of America, for example, sets a cap of six withdrawals and transfers and charges $10 for each transfer or withdrawal made over that limit. Chase Bank charges $5.
Remember, this is America, not North Korea, and banks can operate how they want as long as they are within the law. Also keep in mind that risk-averse bank policies, though sometimes inconvenient, might indicate your bank manages its money — and yours — more prudently than competing institutions with more freewheeling policies.
How much money can I transfer from savings to a checking account?
Under federal law, there are no limits on transfers from savings accounts to checking accounts. Even when Regulation D’s limits were in effect, they only limited the number of transactions. They never limited the monetary amount. You should ask your bank if they have any in-house regulations pertaining to this, however, since this is a possibility.
What if I go over the savings withdrawal limit?
Under federal law, nothing need happen. However, if the bank has an in-house limit, it might charge a fee for each subsequent transaction over its limit, such as a $10 fee for each excess transaction.
Why is there a savings withdrawal limit?
This was implemented to make sure that banks had satisfactory capital reserves. Although the federal government no longer sets a limit, some banks choose to err on the side of caution and continue to impose one.
Is there a cash withdrawal limit from a savings account per day?
Not unless your specific bank limits you. Regulation D set transaction limits on a monthly basis, not a daily one. Banks that have in-house regulations will typically follow the “six per month” rule they grew accustomed to under Regulation D. If you do all your transactions on a single day each month, you can do no more than six such transactions if your bank imposes a six-transaction limit. A bank may also set dollar limits.
It is also worth noting that transactions over $10,000 could bring you unwanted federal attention due to currency transaction reporting requirements.
- As of April 2020, there are no limits on transfers and withdrawals from savings accounts on a federal regulatory level.
- Before April 2020, the Fed implemented a six-transaction limit per month on savings accounts. This was to make sure a bank’s capital reserves were satisfactory.
- Although the law limited certain transactions to six per month, some transactions were excepted from the limit, such as going to a teller to get cash.
- Banks continue to implement a six-transaction limit as an in-house rule. This may differ from bank to bank, so be sure to check with your bank, credit union, or other financial institution to make sure you know the rules for your account.
More to explore
Ready to learn more about savings accounts and savings in general? Do you wonder how much money you should save up before moving out of your parents’ (or charitable friend’s) home? Read this article to find out. Do you wonder if you can have your paycheck direct-deposited into your savings rather than your checking account? Find out here. Just wonder how much cash you should keep on hand in general? Click on over to this article to figure that out.
View Article Sources
- Banks Were Allowed to Give People More Access to Savings in the Pandemic — New York Times
- Currency Transaction Reporting — Federal Deposit Insurance Corporation
- Federal Register Volume 74, Number 102 (Friday, May 29, 2009)…Pages 25629–25639 — Government Publishing Office
Records the 2009 revisions to Regulation D.
- Federal Reserve Actions to Support the Flow of Credit to Households and Businesses — Board of Governors of the Federal Reserve System
- “Regulation D: Reserve Requirements” in Consumer Compliance Handbook — Board of Governors of the Federal Reserve System
- Useful background articles from Forbes and from banking sites — Various
- Can You Direct Deposit Into a Savings Account? — SuperMoney
- Chase Savings Account Review — SuperMoney
- Compare Savings Account Interest Rates — SuperMoney
- How Much Cash Should I Have On Hand? — SuperMoney
- How Much Money Should I Save Before Moving Out? — SuperMoney
- How to Avoid Tax on a Savings Account — SuperMoney
- Should I Open a Savings Account and Why? — SuperMoney
- What Is a Sweep Account and How Does It Work? — SuperMoney