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Regulation D is a federal rule that has historically set cash reserve requirements for banks and credit unions and monthly transaction limits on savings and money market accounts.
In 2020, the Federal Reserve issued an interim ruling—still in effect today—eliminating both the reserve requirement for transaction accounts and the transaction limit. However, your bank or credit union gets the final say about whether it will restrict transfers and withdrawals from savings and money market accounts and what the penalties will be if you exceed the limit.
What Is Regulation D?
Regulation D is a rule established by the Federal Reserve Board that regulates the amount of cash banks and credit unions must keep onsite or in a Federal Reserve account to cover certain deposits and liabilities. Additionally, it used to limit the number of "convenient" transfers and withdrawals customers could make from savings and money market accounts each month to six. Customers who exceeded these limits were subject to fees from their bank or credit union.
In 2020, the Federal Reserve Board reduced reserve requirements to zero and eliminated savings and money market account transaction limits. However, the changes to the rule do not prohibit financial institutions from continuing to limit convenient transactions or assessing fees on customers who exceed the limits.
Transactions Impacted by Regulation D
Not all transfers or withdrawals made from a savings or money market account are subject to Regulation D, but the following typically are:
- Phone transfers, including transfers to other accounts you own and those used to pay bills
- Automatic transfers from your savings to your checking account to cover overdrafts
- Automatic transfers to third parties
- Computer and mobile transfers
- Debit card purchases
- Checks
Transactions Not Typically Impacted by Regulation D
The following savings and money market account transactions aren't generally subject to Regulation D:
- ATM withdrawals or transfers
- Cash withdrawals or transfers made in person at a bank or credit union branch
- Transfers or withdrawals made by mail
- Telephone transfers when you receive the money by check
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How Has Regulation D Changed?
Before 2020, banks and credit unions were required to have a specific amount of cash on hand to cover certain transactions. But in March 2020, reserve requirements were reduced to zero in response to a shift in monetary policy. Since then, financial institutions are no longer required to maintain cash reserves on transaction accounts.
Additionally, under Regulation D, customers couldn't make more than six convenient withdrawals or transfers from their savings or money market accounts each month. While this rule was in place, banks and credit unions were required to prevent customers from making more than six monthly transfers or monitor their account if they exceeded the six-transaction limit. If a customer repeatedly exceeded the limit, financial institutions had to either move the funds to a different account or prevent the customer from making more than six transfers or withdrawals each statement cycle.
However, on April 24, 2020, in response to the reduced reserve requirement and the COVID-19 pandemic, the Federal Reserve Board eliminated the limit on the number of convenient transfers and withdrawals customers could make each month. This gave customers easier access to savings at a time when many Americans were struggling financially.
As of today, the Federal Reserve Board has not reinstated the transaction limit. However, banks and credit unions may voluntarily impose limits on savings and money market account transactions, and they can charge fees for exceeding the stated limit. Depending on the bank's policy, fees may increase with each transaction above the limit.
Why Are Some Savings Withdrawals Still Limited?
The purpose of a savings account is to grow your savings—that's why they earn interest. They're not meant to be used for everyday transactions like paying bills, writing checks and making debit card purchases. Some financial institutions continue to limit the number of transactions you can make from your savings or money market account each month to encourage savings and reduce transaction costs.
How to Avoid Hitting Withdrawal Limits
With a bit of planning, it's possible to avoid reaching your bank or credit union's withdrawal limits—if they have them. Here's how.
- Open a checking account. Checking accounts don't typically limit the number of transactions you can make. Use your checking account for routine transactions like bill pay, debit card purchases and automatic transfers to other accounts instead of using your savings account.
- Maintain a financial cushion. Keep a (small) financial cushion in your checking account to reduce the need for making transfers from savings to cover everyday expenses.
- Transfer money in person. If you've already reached your limit for the month and you need to transfer money from your savings to another account, do it in person. In-person transfers don't count against the transaction limit.
- Make in-person withdrawals. Withdrawing money from an ATM or in person at your bank or credit union branch isn't considered a convenient transfer or withdrawal, so it's not subject to transfer limits.
- Plan your transfers. If you need to make an electronic or telephone transfer, plan ahead and transfer all of the money at once to avoid making multiple smaller transactions.
- Set up low balance alerts. Overdrawing your checking account can trigger an automatic transfer from your savings to your checking account if you have overdraft protection. Staying up to date on your account balance can help you avoid spending more than you have.
The Bottom Line
Although the Federal Reserve Board has suspended transaction limits on savings and money market accounts, some financial institutions may still impose them and may charge fees to customers who exceed them. To find out whether your bank or credit union charges fees for exceeding the six transaction limit, check your account disclosures.
To avoid exceeding the transfer limit, maintain a checking account for paying bills, scheduling automatic transfers and making debit card purchases. Use your savings account to keep your money safe while you work to achieve specific financial goals such as building an emergency fund, saving for a down payment on a house or setting aside money for your next vacation.
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