If you like this post then please consider subscribing to my RSS feed. You can also Subscribe to Debit versus Credit by Email and have new posts sent directly to your inbox.
I understand the purpose of a savings account completely: they are to be used to put money into and to keep it there. However it would be an insane idea to think that one would not have the ability to access that money with any level of ease. The Federal Reserve however seems to think otherwise; convenience to them is not something that we as consumers should be allowed to have when it comes to accessing our money. Let me explain.
Last month I switched to a new brokerage account and transferred money from my savings to the brokerage account several times. I also payed off a large credit card bill with money from my savings. I also miscalculated the amount that I could transfer to my savings from my checking without leaving myself short on cash in the checking account. I messed up, just a little bit. I had to transfer money back from my savings to my checking to cover some basic expenses. Pretty simple mistake to make really… I’m sure just about everyone out there has done that at some point in their life.
The point is that I made several transfers from my savings to my checking account throughout the month of May, as well as a few ACH transfers from my savings to my new brokerage account. The problem with this is – as some of you may be aware – that the Federal Reserve board has set limitations on the number of transfers you can do OUT of your savings accounts in any given month. The limit? Six. Oops… I went WAY over that. So at the end of the month I notice a fee in my account for excessive transfers. There goes my interest for the last five months. Naturally I called my bank (USAA) to ask them to reverse the fee. After I asked they offered to reverse half of it, which I gladly accepted.
I decided to do some research after this fiasco to learn more about the Federal Regulation that has caused me so much grief. It’s called Regulation D and it can be found at the Fed’s Reg D site but so as to alleviate the pain that you would encounter trying to read such legal mumbo-jumbo I will paraphrase the relevant parts of Reg D…. right after I quote directly from it.
the depositor is permitted or authorized to make no more than six transfers and withdrawals, or a combination of such transfers and withdrawals, per calendar month or statement cycle . . . to another account (including a transaction account) of the depositor at the same institution or to a third party by means of a preauthorized or automatic transfer, or telephonic (including data transmission) agreement, order, or instruction, and no more than three of the six such transfers may be made by check, draft, debit card, or similar order made by the depositor and payable to third parties
That part is pretty straightforward. You (as the depositor) are not authorized to take money out of your savings account more than six times a month (either by withdrawal or transfer) unless you do so at an ATM or at one of your banks branches.
Ok. I understand the reasoning for the limits on taking money out of a savings account – after all it should not be used like a checking account (in that you take money out of it on a daily basis). There should not be any reason, however, to limit a person to six or less convenient withdrawals or transfers from their savings account.
We are in a new age today. We’re more technology savvy than any previous generation has ever been. We demand convenience. In the age of internet banking where I can literally do all of my banking without ever leaving my house there should be no reason to limit transfers from a savings account to six. I understand the limit (a savings after all is not a transaction account), but six is just… not enough. These limits were set in the 1980s when Reg D was first enacted. If you ask me it’s more than just a little outdated. When this was created the internet was hardly even known to be in existence, let alone internet banking. If you ask me it’s time for a revision.
What do you think?
July 1st, 2008 at 2:23 pm
talk about too much government in our everyday life. i am ok with saftey regulations for our savings, but requireing me to drive my car to a branch office to withdrawl money for my own account is wasteful, and just plain lacks common sense.
August 30th, 2008 at 9:59 pm
The banks should put a notice out on their monthly statements and explain the regulation D for their customers. I had the same problem because I was not aware of such regulation. The check that I issued to my contractor was bounced and he was penalized for the check and above all his bank will not accept any deposit by check for three months. I paid the penalty for the bounced check and appologized a hundred times for the inconvenieces I caused him.
One more thing, my bank should have notified me the moment that they realized they cannot make the transfer from saving to cover the check. I have been working with this bank for more than twenty years and I expected some curtasy.
A. Salehian
September 10th, 2008 at 2:28 pm
This is a response to Ali’s post. It is required by the Truth in Savings Act that the bank disclose the Reg D limitation to you when you open your account. If you have your original disclosures and they don’t mention anything about Reg D you can demand the fees be refunded and, in fact, they cannot limit the amount of withdrawals on your account until they provide you proper disclosures.
February 4th, 2009 at 7:37 am
What you all need to realize is that the purpose of Reg. D is not to make your life miserable. Banks need to keep a certain amount in reserves that they cannot loan out. On a checking account, the reserve sometimes around 10%, but on a Money Market or Savings account the reserve is 0%. The bank assumes that you are not going to use your MMDA or SAV like a transaction account and therefore does not have to keep all your money on hand. However, with a transaction account they need to keep at around 10% because you are typically constantly doing transactions on the account.
Obviously, I’m a banker, and I work in deposit compliance. I allow my customers to go over the limitations one time in a quarter, but if they do it more than once I send them a letter explaining the requirements of Regulation D. If they exceed the limits more than once in the second quarter then I change their account to a Checking. Banks can be fined heavily for not following Regulation D which is why it is so important consumers realize its not the bank just being a jerk, this is a Federally regulated requirement.
February 8th, 2009 at 2:20 pm
Banker Bee,
Thanks for the comment. While I understand and appreciate your thoughts on the matter (I’m in banking too), you still seem to have skipped over the entire point of this post. I didn’t say that the banks were the jerks. I only stated that I believe Reg D is outdated and is in need of being updated. For that matter most banking regulations are outdated, but that’s an entirely different story.
Thanks for the comment and I hope to see you around more often!
April 2nd, 2009 at 10:02 pm
Banker Bee, et al.
You’re all overlooking a major point. The number of transactions, which the authors of Reg D were ostensibly concerned about, has NOTHING to do with the amounts transacted.
If a person transfers THEIR OWN MONEY out of their savings 7 times in a month, but also transfers THEIR OWN money 1 or more times back into their savings account with deposits that are equal or greater than the total withdrawals; just what is the BFD?
Also the “regulation” does not specify the fee banks or credit unions should charge. Some charge $10, some $30, and some $45 or more, and most (all?) inhibit future transactions that will incur more fees.
Don’t kid yourself, Reg D is simply a means for banks to charge more fees, while conveniently claiming they’re not responsible.
Banks SHOULD push back on Reg D in the names of their disatisfied customers, but they’re not doing that, are they?
Wake up people:
Add your recent Reg D bank fee to the trillions of dollars in bail-outs and stimulus for socialism that is robbing tax payers, your children, and their grandchildren of YOUR wealth and YOUR families’ financial freedoms.
September 25th, 2009 at 1:24 pm
I just got this ridiculous charge assessed on my account. What infuriates me is that they didn’t bother to asses it until the end of the statement cycle and they charged me $180 – $15 for each occurrence. If they had stopped my from accessing my savings the first time or assessed the fee the first time, I would have called – found out the issue and not done it again. I had no idea I couldn’t access my own money. I find it hilariously ridiculous that if I take the time of their employees and go into the bank to do this every day, it is free but if I do it online, I’m penalized. I need to get the corporate complaint address. I worked in the financial industry and my experience is keep going higher, eventually you’ll get to someone high enough that doesn’t want to waste their time on your “menial little fee complaint” and they’ll adjust it.
November 25th, 2009 at 8:36 am
My problem with Reg D is that the claim it must be followed or the institution will be penalized is BS if every institution has their own variation of following it. How is an ATM any different than online or phone? How can one institution charge a penalty (or not) while allowing more than six transfers and another stopping any future transactions?
If an institution calls their online interface a “web-branch” then one should consider it to be the same as a “brick and mortar” branch and the discussion should be done. But i get the impression some institutions are using Reg D to squeeze other fees from their customers.