Before You Take Money Out Of Your Savings Account Understand Regulation D – Americans’ budgets may be tightening as a result of the coronavirus’s economic impact – layoffs, wage cuts, and decreased company income. That means you may need to withdraw funds from your savings account to pay bills or cover living expenses.
Your savings account, on the other hand, is governed by Federal Regulation D. Customers can only withdraw money from their savings accounts a certain number of times per month, according to Regulation D.
Customers who exceed their allotment are usually charged a fee, but during this crisis, some banks and credit unions are waiving the fee.
What Is Regulation D?
Regulation D of the Federal Reserve, which went into effect in 2008 during the Great Recession, is part of a regulatory framework designed to maintain financial stability.
This clause limits certain deposits and withdrawals from a savings or money market account to six transactions per month, according to Eileen Grogan, assistant vice president of payment solutions at Affinity Federal Credit Union in Basking Ridge, New Jersey.
According to her, another reason for the rule is to prevent savings accounts from being used in the same way as checking accounts.
According to Grogan, the rule also allows people to use their savings accounts for what they were built for saving money.
Regulation D imposes a cap on how many transactions can be done without visiting a branch or using an ATM. A person’s ability to conduct electronic transactions is restricted by statute.
There are a total of six acts in this set:
- Preauthorized, automatic transactions, including those from savings, account for overdraft protection or bill payments.
- Telephone transfers.
- Transfers/withdrawals are made by check, debit card, or another similar method.
- Online and mobile banking transactions.
- Payment services such as Zelle.
However, these actions do not count toward the six:
- Transactions made with a teller at the bank.
- Withdrawals or transfers via an ATM.
- Withdrawals via phone if the bank mails you a check.
What Happens if You Exceed Regulation D’s Limits?
Most banks charge a small fee on each withdrawal that reaches the limit if you withdraw money from your savings account more than six times. Chase will assess a $5 fee, Bank of America, Capital One, and Ally Bank will assess a $10 fee, and Wells Fargo will assess a $15 fee. Fees are not paid by Citibank or Discover Bank.
Banks can deny your transaction, convert your savings account to a checking account, or close your account if this occurs frequently.
Customers who make more than six withdrawals per statement cycle from their savings or money market account will be excluded from the $10 fee until July 18, according to Anand Talwar, deposits and customer strategy executive at Ally Bank.
This decision, he says, would “assist our customers in better weathering these trying economic times.”
Check Holds: What You Need to Know
Your bank may make you wait before funds from a deposit are available.
Plan so That You Can Avoid Regulation D Penalties
You will stop paying Regulation D fees if you plan ahead of time. Calculate how much money you’ll need to pay your rent or mortgage, car loan, and other monthly recurring bills such as cellphone, cable, and utility bills. After that, make a larger transfer from your savings to your checking account.
“Use a checking account as the primary transaction account for everyday spending needs,” recommends Stacy Kika, assistant vice president, corporate communications at Wells Fargo.
If you rely on overdraft insurance to cover the balance in your checking account, keep track of your balance by calling, checking online, or using a mobile app.
If you’ve met your monthly withdrawal/transfer limit but still need funds from your savings account, consider the following options: Using an ATM or go to your nearest branch, which you will usually do with a drive-thru these days.
Sign up for direct deposit if your company provides it. Set up a scheduled transfer of funds from checking to savings, and make your direct deposit go to your checking account, according to Grogan.
While most money market accounts allow you to write checks, avoid paying bills from either this or a savings account.