Savings accounts are a great place to stash your extra cash. They’re easier to access than certificates of deposits and more lucrative than checking accounts.
But a federal rule sets a withdrawal limit on savings accounts, meaning your money might not be as accessible as you think.
Regulation D, also known as Reg D, is a Federal Reserve Board rule that puts a limit of six transactions per month on certain transfers and withdrawals from your savings or money market account. If you go over the limit, the bank or credit union can charge you a fee, close your account or convert it into a checking account.
Regulation D is the federal government’s way of encouraging people to use savings accounts as they are intended — to save money — and ensures that banks have the proper amount of reserves on hand.
» Looking for a new place to stash your savings? Check out NerdWallet’s best savings accounts
The law doesn’t apply to checking accounts, so you should be able to make an unlimited number of withdrawals and transactions from those accounts.
Which transactions are limited under Reg D?
These kinds of transactions in savings or money market accounts fall under the rule:
- Online transfers from those accounts to a different account either at the same institution or a different one
- Transfers processed over the phone
- Automatic or preauthorized transfers, such as bill payments or any other recurring transfers
- Overdraft transfers from your savings account to your checking account
- Transfers made by check or debit card
Which transactions don’t count under the limit?
The following don’t count toward the six-transaction limit:
- Withdrawals or transfers made at ATMs
- Transactions made in person at a bank
- Withdrawals made by telephone if the check is mailed to the depositor
Even though Reg D exempts these types of transactions from the six-transaction limit, some banks, such as Bank of America or Chase, may have their own rules to charge a penalty for making more than six such moves per month.
What if I go over the limit?
The consequences of going over the Reg D limit depend on your financial institution. Some banks charge a withdrawal limit fee or an excessive use fee, which typically can range from $2 to $15. Other institutions — Capital One, for instance — won’t charge a fee for surpassing the limit but will note how many times you do that and may penalize you for repeated violations.
Even if you exceed the limit once, financial institutions are allowed to close your savings account or convert it into a checking account. Some companies may decline the transaction.
What if I need cash after I hit the limit?
If you need to access cash from your savings account after reaching the six-transaction limit, use one of the methods not limited by Reg D. That includes using ATMs, withdrawing money in person at a branch or having a check mailed to you (but read your bank’s fine-print rules to make sure it won’t charge you for excessive ATM withdrawals).
Quick tips on avoiding Reg D fees
If you’ve been penalized for going over the limit or want to make sure you never hit it, keep these things in mind:
- Make transfers count; do fewer transfers with larger sums of money
- Link any automatic transfers, such as bill payments, to your checking account instead of savings. Checking accounts don’t have limits on the number of withdrawals.
- If you hit the transaction limit and need to make another transfer or withdrawal from your savings account, do it at an ATM or a bank. Even if your institution charges a fee, you won’t risk your account being closed or converted to a checking account.
- If your checking account has overdraft protection linked to a savings account, try to avoid overdrafts, which would be counted under the six-transaction Reg D limit. Set up low-balance alerts on your checking account and curb your spending if your balance edges to zero to avoid triggering automatic transfers from your savings to checking account.
Amber Murakami-Fester is a staff writer at NerdWallet, a personal finance website. Email: email@example.com.