Limit of 6 ACH Transfers on Savings Accounts
There is a limit of six transfers, ACH or otherwise, per statement cycle on savings accounts as mandated by the Federal Reserve board Regulation D, which defines the rules of each account type and its reserve requirement. Why is this important? With the advent of online savings accounts and the chase for a better interest rate, ACH transfers into and out of savings accounts are becoming more frequent. Before online savings accounts like ING Direct and Emigrant Direct, when you actually had to visit a bank to initiate an ACH transfer; a limit of six transfers on a savings account wasn’t really a problem. In fact, you’d be hard pressed to initiate six in a year, let alone six within a statement month. Now, you can initiate six ACH transfers within a statement cycle without really realizing it and that can be cause to terminate your account!
The reason for this is because your savings account is classified as a “saving deposit” and the reserve requirement on a “saving deposit” is 0%, compared to something like 10% on a “transaction account.” A reserve requirement is how much of the balance the bank must keep in reserve and not give out in loans. So when Emigrant Direct gets your $1,000 in your saving account, it doesn’t need to hold any of that in its reserves, it can loan all thousand dollars because the reserve requirement on a savings account is 0%. (hence the attractive rates) On a checking account (a transaction account) however, they must retain 10% of the balance on hand because the assumption is you will be drawing on your funds more frequently.
So, why did I look this all up? Because when I was reading the Emigrant Direct’s disclosure statement (link), I stumbled upon this rule:
Federal regulations require that no more than six (6) transfers per statement cycle may be made to (1) an account at another bank or financial institution, including your External Account, (2) to another EmigrantDirect account or (3) to a third party by means of a preauthorized or automatic electronic transfer. We reserve the right to close your Account for violation of the above restriction.
This is nearly an exact copy of Section 204.2(d)(2) of Regulation D of the Federal Reserve Board’s definition of a “savings deposit:”
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. (reference)
So, be aware of the six transfer limit on online savings accounts or you might be in for a surprise!
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Tags: Emigrant Direct, Federal Reserve, High Yield Savings Accounts, Regulation D
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There are 29 comments, add your thoughts now!
Yeah, I am not a fan of this rule. I got caught by it years ago and it caused me to bounce my rent payment and caused all sorts of headaches at the time. My biggest problem is that it isn’t always advertised that there is this restriction and even worse, the number left isn’t displayed anywhere. In this day and age, I should have a big number right at the top of all my account screens that shows how many of these transactions that I have left.
I can easily hit this number each month and I have no way of knowing if I am going to. Something needs to be changed with this.
-RS
I’ve decided to forgo FDIC insurance and use a money market fund at Vanguard (rates similar to those at ED) for my medium term savings. I can transfer all I want and write checks on it. I like it.
My dad does the same thing and finds that it’s very convenient.
Good tips. We’ve perhaps come close to running afoul of this rule when we make transfers from our main accounts to the subaccounts where we keep our kids’ allowance. I never really thought of it for ‘internal’ transfers such as these.
Weekly Roundup - 03/03/06
Here’s a quick look at some of the best articles of the past week from the MoneyBlogNetwork and beyond…
HSBC online savings seems a lot more generous. It looks like you are limited to 6 outgoing and unlimited in coming.
See below
http://www.us.hsbc.com/1/2/3/personal/savings/online-savings/faq#faq5
“What are the Maximum number of transactions (withdrawals/deposits) in a calendar month or statement cycle?
The Online Savings Account is subject to the”Transfer Limits (Savings, including Money market Accounts)” of our Rules for Deposit Accounts. Only six preauthorized, automatic, computer or telephone transfers can be made from the Online Savings Account to another account per calendar month or statement cycle (or similar period) of at least four weeks. You can make unlimited deposits or withdrawals using your ATM card, and you can make unlimited deposits into the account through any of the deposit methods listed above.”
I think HSBC is following the same federal rules as everyone else… I don’t think those rules apply for incoming transfers. Everything that refers to transfers says “transfer to”…
I totally disagree with this policy. I keep most of funds in my savings to draw interest, then transfer when I need to in order to write checks. I have gotten ‘hit’ a number of times when my auto-withdrawls conflicted were rejected due to my having hit my “limit”. This is a typical Democrat-type (Clinton days) of law that thinks they can control the individual in all aspects “for his/her own good.” Spare me.
I just had my checking account closed because of this “law”. I kept exactly $100 dollars in the account and transfered from Savings into Checking when a purchase was made using the Debit card or check. I did not want my money/ID stolen from from Checking and figured it would be safer to keep all my cash in Savings. This sucks.
I think its a good rule. I mean, its only MY money. The Gub-Mint should be able to limit what I do with my money that I earn.
As a people, we have the “right” to murder our unborn children, but I can’t move my money where I feel it should be.
Little rules like this add up. One day we will turn around and realize we let this happen to ourselves.
Thomas: Just put in a checking account and you can make as many transfers as possible.
Caution on the Vanguard idea. $3,000 minimum to avoid low balance fees. Regular account maintenance fees. And checks cannot be written for less than $250.
i’d like to know which federal government stooge came up with the idea of imposing an arbitrary transfer limit of 6. if i exceed it, the bank gets to confiscate a large amount of my money!
how much are the banks paying the guy off?
i say take it to court.
This rule is insane and we the people should lobby our government to get it changed. If you read the text of the article, it is clearly spelled out that this is done to allow banks to loan out more money. They have to keep 0% in reserve for savings accounts, 10% in reserve for “transaction” (like checking) type accounts.
Why it is not 10% for both is beyond me. What the Federal Regulation is basically saying is that for your savings accounts we will let the banks play with and profit off of ALL of your money but for your transaction accounts they can only use 90%. How slanted and totally biased against the people who put their money into banks is this??? The banks can’t be satisfied with access to 90% of your savings money?? So Joe Schmoe can’t use his money as he sees fit and in fact could lose some money to excessive transaction fees or even have the account closed (maybe not the worst thing in the end - can you say “PayPal”?).
I have had this problem during several of the recent months and today my wife got a letter from her bank for the same thing and they’re going to charge her $5 for every excess transaction! Of course it’s the everyday citizen that gets hurt by some regulation set up to allow banks to make more money… Amazing? Sadly, much too commonplace in our government.
This is definitely NOT government FOR the people. We need to wake up and stop allowing this ever-chipping-away at our rights and freedoms, especially for the benefit of big business. This hardly seems like a “Democrat-type” thing as opined by pilot. If it must be categorized in a political vein (not that I really care to), I feel it fits much more squarely in the Republican-type camp.
Write your Senator and Representatives. I’m going to. This REALLY needs to change.
Uh, yeah this wasn’t even close to being put in effect during the Clinton administration. It was put in effect in November 1980 which, if I remember correctly was…..RONALD REAGAN.
Insomn3ak you remember INCORRECTLY. Ronald Reagan was elected in 1980, but was not sworn into office until January 20, 1981.
In November 1980, JIMMY CARTER was President.
the comments here amaze me by their complete lack of any knowledge of how banks or the financial institutions work.
The 10% reserve rule is to ensure the banks have sufficient liquidity so they can physically give you your money when you have a ‘transaction’ type account (like a checking account) that is used on a daily basis. (similarly a mutual fund is never 100% invested in stocks because as people redeem their shares the fund manager can’t go and sell 10 shares here 10 shares there to be able to pay the shareholder out).
The point of a ’savings’ account is that you use it on a less frequent basis, so the banks can manage their liquidity and utilise more of that capital to on-loan to other customers. (remember these are all short term cash deposits, and the banks may well use these amounts against longer term loans such as car loans or term loans).
For example a CD will have 3, 6, 9 or even 12 month limits. That means that you can’t take your money out of a CD for that ENTIRE period. These savings accounts being offered give near-similar interest rates to CDs, but are more flexible in that you can still take out 6 transfers per month.
If the 10% reserve requirement is applied to the savings accounts, then your interest rate you earn will be less.
Checking (and especially ‘free’) accounts give paltry interest… often less than 0.5% vs the current 3.5-4.05% on a savings account (and CDs are similar rates).
And no the bank doesn’t TAKE your money if you violate the rule, they just have to CLOSE your account… ie. give you your money back (less a fee).
If you hate the restrictions on savings accounts so much, keep all your money in a free no-interest checking account by all means and leave the 3.5% interest rate to those who know how to handle their finances.
Well said Anon. I too was amazed and some dumb comments about how the banks are taking our money and so on. I was going to reply to that but your comments say it all.
Counting transfers from your saving account to your checking account at the same bank as a withdrawal is pretty shameful. And worse the limit is only on ACH transfers; when you request an account transfer by phone it doesn’t count against your 6 by. Just open as many savings accounts as you need. I had no problem doing that with Etrade.
THIS IS THE MOST RIDICULOUS THING EVER! MY BANK JUST CHARGED ME 20 FOR EVERY TRANSACTION I WAS OVER, THAT IS SO STUPID!!
Anon you have some fantastic points on why a savings account should be limited. I understand the reasoning behind it completely, but I feel (as I’ve discussed on my own personal blog) that the actual limited number (that being six) is outdated and should be updated so as to be more appropriate to the age of online banking.
My bank is online only, so I don’t have the option of going to a branch and pulling money out that way so I can avoid these limitations. Why should I be punished because I’m comfortable using an online-only bank instead of one with traditional branches? My thoughts on the matter are that the limitation is in place for a reason, but needs to be updated to a larger number - maybe 12? What do you all think?
Anon - You’ve laid out some lucid arguments about the differences between a checking account and a savings account. I particularly enjoyed the discussion regarding the reserve and liquidity. But here’s some food for thought: I’ve got 2 kids and get paid weekly. I have my paycheck ACH into my savings account and then distribute a little to each of my kid’s savings accounts from home. In a normal 4 week month, I’ve just made 8 outgoing transactions. Now I’m in violation of Reg D and could have my account closed. Yet, I have done absolutely nothing to change the bank’s position. It needs no additional liquid cash to handle the transactions that I’ve made, the “money” went from one savings account to another. Can you please explain to me why this would be cause for fees or possibly closing my account?
I know that I could have my paycheck ACH into the checking account and then distribute to my savings and each of my kid’s savings accounts from there with no violation. The point is, why should I have to do that? And what difference does it make, really? With today’s banking environment, the Reg is outdated and pointless. If the Reg is designed to prevent people from using their savings accounts like a checking account, then it would make sense to count transfers from the savings account to outside sources, not internal transfers.
I have been managing my savings and checking and overdraft and car loans and auto bill pays online at my credit union for a number of years now. I like to utilize my accounts in the way that makes money management easiest for me. I direct deposit into my savings account, and I like to transfer funds from savings to checking at MY LEISURE to cover written checks and bill pays. I am CERTAIN that I have done more than 6 of these specified transactions per month on numerous occasions over the past few years. Only 3 weeks ago did I get a notice from my credit union about this regulation D, and that I exceeded the 6 transaction limit in May. And I am already at 5 just half way through June. This notice was the first time that I EVER HEARD of this regulation D and the 6 transaction limit. My credit union notice says that as of June 1, 2008, it will assess a $15 fee for each such transaction in excess of the 6 transaction limit. This is a bunch of BULL$h!t. You can shove all of this reserves on hand talk aside. I can perform an unlimited number of such transactions (namely transfers between my savings and checking) each month if I just walk up to a teller in the credit union branch. But I can only do 6 of them each month via online banking. WHAT’S THE DIFFERENCE if I transfer money from my savings to my checking in person versus online??? NOTHING!!! I am so pissed over this!
So, Anon (the other one) is telling us that the bank/credit union is NOT taking OUR money? Excuse me….but if each institution is allowed to charge a different amount (different amounts named from $5.00 to $20.00 are mentioned here) then WHO IS it that is taking our money? If the Government were taking it wouldn’t there be one charge across the board? And IF it was the Government taking it or a share of it, then it is equally as repugnant to me…..they take enough of our hard earned money as it is thank you very much.
First of all, it is OUR money that they are taking because we are using OUR money the way in which WE chose to (and someone decided they didn’t like Americans to have the freedom to spend their money the way they wanted to obviously….). Second, the banks already are profiting by using the money we place in their institution as they loan it out to others…..so if we come between them and their money making, we get hit with a fee…..overdraft, reg D whatever.
And they (the banking institutions, whatever their stripe) sell us the idea of the savings accounts connected to our checking accounts as overdraft protection accounts, yet when we transfer that money ourselves, we get hit with a fee? Only those who believe in weath distribution can support this.
My bank (First Merit Ohio) told me they would shut my Savings Account if I went over the limit again.
My question is, do transfers from Paypal to Savings count in the 6?
I got this letter today, and called about it. Apparently the 6 rule only applies to any transaction regarding a withdrawal from the Savings account. Whether it’s a transfer to savings, a withdrawal from ATM, teller’s check, etc.
It does make for a severe pain in the a$$, and upon reading some of the feedback here, it does make sense for such a regulation to be reconstructed. Especially since society has evolved (I use that term loosely) to be so much different than it was 30 years ago. Technology, social habits, finance handling, etc.
I’m not a professional lobbyer, but if any one who has or will visit this forum would be able to draft up a really good letter to fax/mail/e-mail to the right people, I would deffinately do it.
I agree that the limit of six transfers is to low. Today I found out that I had hit the limit and I now have too drive to the bank to use the ATM machine to transfer money. Whether I use the ATM, a teller or online banking the net effect is the same: money from my savings will go into my checking account. So where does this liquidity come into play? This would make sense if any type of transfer was limited but in this case my savings ACH will be lowered regardless of the method used.
This should be changed and the limit raised to reflect the reality of people doing more online banking. Inline with this I’d also like to see Banks not charge so much for overdraft protection. In my case the bank pulled money out of my savings to cover debit card use and I got nailed $25 per transaction. I think that is pretty excessive for the bank doing what I normally do at home on the computer. If a teller was involved then perhaps the fees might make some sense but when the banks computer automatically transfers money from my savings to my checking< I think $25.00 per is over the top.
I am amazed the ignorant comments keep coming after Anon succinctly stated the obvious. The simple solution to the 6 transfer limit is to deposit your salary into a savings account and automatically periodically transfer a lump sum into a checking account, where you can withdraw as much money as often as you’d like. Being the old fart I am, I remember having to pay checking account fees and per check fees.
If you are the typical American that carries perpetual credit card debt and lives paycheck-to-paycheck, then reverse the process. Deposit your salary into your checking account and make deposits to savings, and leave the money there as emergency cash. You will earn less interest in the long run, but you will not incur those terrible, unfair fees that penalize you for taking out your own money.
People claim they never heard of the withdrawal restriction because they never read the rules and regulations of their account,. They must have lied and clicked the box that states they did when they signed up. These people have no one to blame but themselves. Do they? Ha! They blame the evil banks, the gubmint, the President, etc.
Grow up, folks. Take responsibility for your actions. Practice capitalism and vote with your dollars. If you are dissatisfied with the products and services you receive, do business elsewhere. Don’t just whine about it.
This rule is good. Annoying, yes; but good. This is what allows banks to loan out all the money we deposit in our savings accounts so they can make interest on it, thus allowing them to give us greater interest in return. They have a better gauge of how much home they need to be held accountable for then on any given day. Take this a step further and you have CD’s where you tell the bank you won’t withdraw any of the money for a set number of months…any because of that you get a higher interest rate from the bank.
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