How do banks handle withdrawal limits today?

Although the Fed’s unwinding of Reg D continues, it is not permanent. It was implemented as an “interim final rule” that allowed them to quickly change policies. They may end the rule later, but the Federal Reserve has not yet done so.

Many banks still voluntarily impose a six-month limit. If you exceed this limit, you may face fees for each additional transfer. Some banks may even convert your savings account into a checking account, causing you to lose the high APY you’ve earned.

Here are some examples of current policies of leading banks.

Some banks have additional policies worth considering. For example, some may waive overdraft fees if you maintain a minimum balance or have a premium account relationship. Others may send warnings before converting your account type. It’s always worth checking your account agreement or checking with your bank to understand these details.

If your account has withdrawal limits, some strategic planning can help you avoid fees. The important thing is to maintain both checking and savings accounts with the right strategy for each.

Think of it this way: your checking account While your savings account must first collect deposits, it must also make regular money movements. Keep enough in your checking account to cover regular transactions like bills and credit card payments.

“In general, a savings account is best used for storing money for specific goals or as an emergency fund, while a checking account is better suited for day-to-day transactions,” says Gomez. “The rule of thumb is to keep enough money in your checking account to cover 1-2 months of expenses. This way, in addition to your direct deposits, you can also avoid spending your savings on daily expenses.”

Here’s a practical example: Let’s say your paychecks arrive in your savings account on the 15th and 1st of every month. Instead of paying your bills directly from your savings (rent, credit cards, car payments, insurance, and student loans), follow these steps:

1. Calculate your total monthly expenses
2. Add a buffer for unexpected costs (maybe 10-15%)
3. Set up an automatic transfer from savings to checking to cover the total amount
4. Schedule this transfer to occur shortly after the first paycheck of the month
5. Pay all bills from your checking account

This approach uses only one of your six months of transactions while making sure you pay all your bills. Plus, you’ll still have flexibility for unexpected expenses or additional transfers if needed.

The Fed designed Reg D to help banks maintain cash reserves by limiting certain withdrawals from savings. money market accounts up to six per month.

An amendment to Reg D during the pandemic deleted the six-transaction-per-month limit that is still in effect today. Banks are not actually required to impose withdrawal limits on savings account transactions, but many people choose to do so anyway.

To avoid fees or account conversions, consider making a monthly transfer from savings to checking to cover expenses. If you need to make additional withdrawals, using ATMs or visiting bank branches usually doesn’t count towards your limit.

Note that some banks have relaxed their policies, while others have maintained these limits. Understanding your bank’s rules and planning your transfers can help you avoid unnecessary fees. The key is to find the balance between providing access to your money and allowing your savings to grow undisturbed.