Regulation D (FRB)
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Reserve Requirements for Depository Institutions (12 C.F.R. 204, Regulation D) is a Federal Reserve Board regulation that limits the number of preauthorized withdrawals and transfers from a savings account or money market account. The regulation applies to all United States banking institutions offering such accounts.
In consumer banking, "Regulation D" often refers to §204.2(d)(2) of the regulation, which places a limit of six withdrawals or outgoing transfers per month from savings or money market accounts via several transaction methods. Transactions counted against the limit include "preauthorized or automatic transfer, or telephonic (including data transmission) agreement, order or instruction, or by check, draft, debit card, or similar order made by the depositor and payable to third parties." Transactions not counted against the limit include "mail, messenger or in person or when such withdrawals are made by telephone (via check mailed to the depositor)."
The law was amended in 2009 to allow greater freedom for the depositor: beforehand, the limit was six withdrawals per month if the funds remained within the same institution (e.g., transfer to checking), but was only three drafts where the funds left the institution (e.g., check, ACH, or card based purchase).
The number of deposits or incoming transfers into savings or money market accounts is not limited.
Regulation D defines the rules of each account type, and in particular its reserve requirement — the aspect of law that applies to this six-transfer limit. Online access to bank accounts has brought with it the ability to make transfers to and from various accounts. A savings account is classified within the banking and regulatory system as a “saving deposit”, and the required reserve requirement for a bank on a “saving deposit” is 0% of the balance, versus approximately 10% on a “transaction account” such as a checking account. This reserve requirement stipulates how much of the account balance a bank is required to keep in reserve (i.e. the portion of a deposit a bank may not give out in the form of a loan). A bank that holds a deposit in a consumer's savings account is not required to hold any of that back in reserve and may lend out the entire amount, as the reserve requirement on a savings account is 0% whereas on checking accounts (known as "transaction accounts"), the bank would be forced to retain an amount equivalent to 10% of the balance on hand. This is because transaction accounts will have more frequent drawing of funds (hence the need for a reserve). To maintain the "saving deposit" designation, the six-transfer limit is applied to savings accounts. The six-transfer limit seeks to limit the transactions that would otherwise traditionally fall into the category of a checking account (even though this limit can now be circumvented through ATM transfers and certain other enumerated methods).
Negative Impact on Consumers
There are negative consequences for consumers who prefer to keep most of their cash in savings and transfer to checking as needed. This may be desired for two reasons: protection of funds from debit card fraud and increased yield on savings balance.
While the interest on savings may be an inconsequential issue, the exposure to fraudulent charges on a debit card is a real threat to consumer's security imposed by this regulation due to the fact that it can force bank customers to keep larger amounts in their checking accounts which can be especially risky when traveling and using debit cards for many purchases at various unfamiliar locations.
A possible work around could be to open a second checking account ( not subject to these restrictions ) and not print checks or obtain a debit card. You can keep extra cash in that account and using online or phone banking, transfer funds to your "active" checking account.
The disadvantage comes both to users of smartphone banking access and online banking because a consumer can find they need to transfer funds to cover a purchase and are effectively locked out of their own money without a physical visit to an ATM. Not always possible, especially when traveling.
Many consumers tie their savings to their checking for overdraft protection which becomes unavailable after six transfers, leaving banking customer subject to bounced checks and overdraft fees when they are unable to relocate funds to cover purchases.
Customers of various banking institutions in the United States could also be disadvantaged should they exceed or approach their six transfer limit. Some banks begin charging excess activity fees after their customers exceed the limit, while others have been found to charge fees when approaching the limit.
Regulation D of the Federal Reserve