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You may now have more freedom to make withdrawals from your savings or money market account thanks to a pandemic-era rule change that the federal government has left intact.
Regulation D affects how banks and credit unions classify certain types of accounts. In April 2020, during the first wave of Covid-19 in the U.S., the Federal Reserve Board announced changes to Regulation D with the goal of making it easier for people to access their savings deposits without penalty, “at a time when financial events associated with the coronavirus pandemic have made such access more urgent.”
While some banks and credit unions responded by dropping their fees for excess withdrawals from savings accounts and MMAs, others have kept their pre-Covid-19 penalties in place. You may be able to access the money from your savings more easily now—or you may still face fees, depending on where you bank.
What Is Regulation D?
Regulation D is a federal rule regulating how banks and credit unions manage your savings deposits. Until April 24, 2020, the Federal Reserve’s regulation limited the number of withdrawals you could make from a “savings deposit” account, which included both savings accounts and money market accounts.
Regulation D had required savings accounts to be limited to a total of six “convenient transfers and withdrawals” per month. These included:
- Automated Clearing House (ACH) payments and electronic funds transfers (EFTs)
- Bill payments deducted directly from your savings account
- Debit card transactions
- Overdraft transfers (where you link your savings account to a checking account as a backup for overdrafts)
- Transfers made by computer, mobile device or phone
- Checks written to a third party
- Wire transfers
There were two major exceptions to Regulation D:
- You could make unlimited withdrawals from an ATM or in person at a bank. (Those transactions were not considered “convenient.”)
- You could make unlimited withdrawals over the phone—but only if the teller cut you a check by mail. (If the bank processed your request online, it counted against your monthly limit.)
Regulation D required savers to be careful about how many transfers or withdrawals they made. If you went over the monthly limit, your bank could potentially charge you a fee per excess withdrawal, close your savings account or convert it to a checking account.
Why Does Regulation D Exist?
Banks and credit unions are required by federal law to keep a certain amount of cash on hand—also called reserve requirements—to make sure they can cover customer withdrawals.
Regulation D helped ensure banks had adequate reserves by limiting the number of withdrawals customers could make from savings and money market accounts each month. The rule never applied to checking accounts, which is why those always allowed unlimited withdrawals.
However, as part of the federal government’s financial response to the Covid-19 crisis, the Fed made changes to Regulation D so people could dip into their savings more frequently without penalty.
What’s Different Now About Regulation D?
Under the revision to Regulation D announced in 2020, the Fed has loosened requirements for how banks treat savings deposits. Instead of limiting bank customers to six convenient transfers or withdrawals from a savings or money market account per month, Fed rules now allow for unlimited transfers or withdrawals. Individual banks and credit unions, however, may still have limits in place.
This six-per-month limit was deleted because the Fed determined reserves were sufficient to no longer warrant restrictions on the number of monthly withdrawals. The move also was part of the Fed’s stated strategy to assist consumers who were struggling financially as a result of the coronavirus pandemic and who could be helped by having more frequent access to their savings.
The change does not have a stated end date. According to the Fed’s savings deposits FAQs, “The Board does not have plans to re-impose transfer limits but may make adjustments to the definition of savings accounts in response to comments received on the Board’s interim final rule and, in the future, if conditions warrant.”
The rules change also has some other specifications for how banks and credit unions can manage and administer bank accounts and their financial reserve requirements, but most consumers have not seen any other significant changes to their accounts.
For example, your savings account will still be called a savings account, even if you make 10 convenient transactions per month from it. Your savings account also will still earn interest according to the bank’s usual procedures, even if you are making more transactions than usual from the account.
Do You Need To Worry About Regulation D?
Unfortunately, Regulation D is still something you need to watch out for. Although it’s been suspended on a federal level, many banks still have the same withdrawal limits in place.
This means you could get charged an excessive withdrawal fee—or risk having your account closed—if you make more than six outgoing transactions a month.
For this reason, it’s important to review your savings account disclosure or call your bank to see what limits and fees may apply.
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How Can the Regulation D Changes Help Your Finances?
Covid-19 caused millions of Americans to lose jobs and struggle to pay their bills, and many consumers had to draw upon their savings as a result. The changes to Regulation D were intended to make it easier for people to access their savings, if necessary, several times per month, without losing access to the account or paying additional fees.
Prior to Covid-19, Regulation D stated that banks and credit unions had the right to convert an account from savings to checking, or even to close a savings account, if the customer made too many withdrawals or transfers in a month. The change to Regulation D gives bank customers more flexibility in deciding when and how to access their savings.
Now, if you’re struggling to pay bills and need extra cash multiple times per month, you have the freedom to withdraw or transfer money from savings as often as you need.
Will Regulation D Changes Result in More Bank Fees?
One concern you may have about the Regulation D changes is whether they will cause your bank to charge new fees or higher fees.
The Regulation D guidance from the Fed does not affect whether banks or credit unions can charge fees for excess withdrawals from savings accounts. While financial institutions were encouraged to allow additional withdrawals without assessing fees, they were not required to change their existing policies. If your bank was already charging an excess withdrawal fee, it will likely continue to do so.
Will Regulation D Changes Affect America’s Saving Rate?
Now that Regulation D has been changed to allow for more frequent withdrawals from savings accounts, is it causing behaviors to change and could it unintentionally motivate Americans to save less money?
It’s difficult to tell for sure. The U.S. personal saving rate has trended downward for much of 2022, but it’s unlikely that changes to Regulation D are the primary cause, especially considering savings rates spiked several times in 2020 and 2021. Ultimately, macroeconomic factors like personal income, consumer spending and inflation are much more influential on how much Americans save.
Your Best Bet? Keep Saving
The Fed’s removal of the six-withdrawal limit on savings accounts gives you more flexibility to access your savings. However, withdrawing money from savings only when you truly need it is still the best course of action.
Regardless of what happens next with Regulation D, it’s important to be careful, disciplined and deliberate with how you use your savings deposits. And with savings account rates on the rise in recent months, maintaining your savings habit has become even more rewarding.
Try to leave your savings in savings. Take care not to overdraw your checking account, and set up alerts to notify you ahead of time when your checking account balance is getting low. Try not to use your savings account as a regular source of cash or as a method of paying monthly bills. Ideally, you should leave your savings alone as much as possible and let compounding interest work its magic to grow your savings over time.
Bottom Line
Regulation D is no longer in effect, but many banks are still enforcing the rule. Review your savings account disclosure to find out what happens if you make more than six withdrawals a month. And if needed, switch to a better savings account that doesn’t charge fees.
Frequently Asked Questions (FAQs)
When does Regulation D reset?
As of October 2022, Regulation D is suspended indefinitely. The Federal Reserve has stated it “does not have plans to re-impose transfer limits.”
Can you get around Regulation D?
There are two main ways to get around Regulation D: switch over to a checking account or withdraw cash using a “non-convenient” method—such as an ATM or branch. Still, you’ll want to check your bank’s policy first. Some institutions count all withdrawals toward the Reg D banking limit, regardless of how you make them. Chase is one example.
