Regulation D is a set of rules issued by the Federal Reserve Board that governs how banks and other financial institutions handle savings accounts. One of the key provisions of Regulation D is that banks are limited to six “convenient transfers or withdrawals” per month from a savings account.
A “convenient transfer or withdrawal” is defined as any transaction that allows the customer to access their money without having to go into a branch and speak to a teller. This includes things like ATM withdrawals, online transfers, and bill pay.
If a customer makes more than six convenient transfers or withdrawals per month, the bank may charge a fee. However, there are some exceptions to this rule. For example, banks are not allowed to charge fees for:
- ATM withdrawals made at the bank's own ATMs
- Direct debits from the account to pay bills
- Withdrawals made by telephone or in person at the bank
What is the purpose of Regulation D
The purpose of Regulation D is to ensure that banks have enough money on hand to meet the demands of their customers. By limiting the number of withdrawals that can be made from savings accounts, banks are less likely to run out of money and be forced to close.
In April 2020, the Federal Reserve suspended the Regulation D withdrawal limits in response to the COVID-19 pandemic. This suspension was intended to make it easier for people to access their money during a time of economic uncertainty. The suspension was lifted in January 2023.
However, some banks have chosen to keep the Regulation D withdrawal limits in place even after the suspension was lifted. This is because they believe that it helps them to manage their cash flow more effectively. If you are considering opening a savings account, it is important to check with the bank to see if they have any restrictions on withdrawals.
History of Regulation D
Regulation D was first issued in 1933, in response to the Great Depression. The Federal Reserve Board, which is responsible for overseeing the banking system, believed that limiting the number of withdrawals from savings accounts would help to stabilize the banking system.
Regulation D has been amended several times since it was first issued. In 1980, the Federal Reserve Board increased the number of withdrawals that could be made from savings accounts from three to six per month. This change was made in response to the growing popularity of ATMs and other electronic banking services.
Benefits of Regulation D
- It helps to stabilize the banking system. By limiting the number of withdrawals that can be made from savings accounts, banks are less likely to run out of money and be forced to close.
- It protects consumers. Regulation D helps to protect consumers by ensuring that they have access to their money when they need it.
- It promotes financial stability. Regulation D helps to promote financial stability by ensuring that banks have enough money on hand to meet the demands of their customers.
Drawbacks of Regulation D
- It can be inconvenient for consumers. The six-per-month withdrawal limit can be inconvenient for consumers who need to access their money frequently.
- It can limit consumer choice. The six-per-month withdrawal limit can limit consumer choice by making it more difficult to find a savings account that meets their needs.
- It can reduce competition in the banking industry. The six-per-month withdrawal limit can reduce competition in the banking industry by making it more difficult for new banks to enter the market.