Limit of 6 ACH Transfers on Savings Accounts
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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
Mar 01, 2006 | Read more in Banking
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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.
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.
Moron, try Jimmy Carter, dem
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.
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.
ok here is my thing. my bank has charged my savings account and yes has taken the money for excessive transactions for both march and april and when i counted the transactions that included online deposit transfers from my checking account. the total now is $30 taken from my savings. another bank that i am changing to said they do not charge for this–the feds will just make you chane the account to a checking. while i don’t agree with this federal rule, i will for now get two interest bearing checkings for free at TD the 50plus club
my question is: is the bank allowed to charge me these fees, basically take my money–is this legal.
the statement of fees i was given did not specify the number you were limited to and i have been fighting with this bank since to get refunded. it is not a lot of money to some people and mabye even not to me, however it is the principle.
i am writing to my govenor, senate, congress and to the president about this rule–perhaps if enough of us do this we can get this law revoked.
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!
I am in the same situation. I got a letter on January 10th regarding my over activity in November. I just started using online bill pay and have now exceeding these limits for both december and january. All three months before they ever sent 1 notice. Bull$hit is right.
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.
I just received information about this rule from the NCUA. While this online transaction limit is legitimate, it ONLY applies to money market savings accounts, NOT regular share savings account.
Well the way I am going to get around it is go to an ATM and transfer from tere, That doesnt count against the limit
I ran afoul of this rule for the first time earlier this year. Not only did I get a letter from Wells Fargo telling me that I better not do it again, but they dinged me $10 at the same time. Nice.
Oh, and when I asked why the feds have this policy, my bank told me it was put in place to help prevent money laundering. ??
Joke — same here with National City. I posted a big rant.
All, I just learned of this, and after googling many times tonight and actually thinking like folks here, I am doing what we all need to do, which is follow the money/politics. The top line is that the banks want to loan as much as possible as that’s how they make money. A good thing for all of us. The bank also wants FDIC to insure as much as possible, but like all government programs, the bank then has to answer to the government. So, the govt’ says they’ll insure transactional accounts as that, at the time, was measurable. Since online banking has evolved, savings accounts for us, the end-user, are now used as transactional accounts, and the banks did not evolve like we have, and can/did not report assets properly. Rather than fixing that problem and thus having the banks and the FDIC evolve and address the problem of personal banking improvements and habit changes at a consumer level, the banks allowed and decided that the GOVERNMENT would limit OUR transactions to allow better reporting to the FDIC from the banks. No — sorry, that’s rather that the BANKS need to limit transactions from us (sarcasm), the people, so that they sasify the government FDIC insurance regualtions in reporting. FDIC insures 90% of transactional accounts, so if we the people move our money to savings, the government won’t insure it (end-of-life result). That means the bank needs to have less risk as our savings is not insured. (it is from bank to us, but not from the government to to the bank). That means the bank needs to be smarter with who to loan money to. That’s why the BANK charges the fee for more than 6 transactions, and not the government. Your bank needs to report data to the FDIC for insurance purposes, and because we all move money online, they can’t track it effectively. Your bank is charging YOU for their own work-around to paying for FDIC insurance. If YOUR account appears as a transactional account, YOUR bank has to hold 10% of your money in “escrow (my term) as insurance…to get FDIC insurance. Accounts that have over 10% (or 6 transactions that some “numbers person” determined) activity or transfers in savings (non-transactional accounts) will be considered transactional accounts, so charged a fee or closed. Closed? Why? Because YOUR account is now a liabilty to the bank because they can’t loan money against yours. Why? Because the government says they can’t. Why? You need to google that as you will come apart. The government needs to get out of banking, and learn that certainty cannot be governed. Follow the money…when it ends with politics and not in your hands, it’s a bad thing.
Thank your government for the simple 6 transaction rule. Be fearful that you are not paying attention to what happened behind that regulation. Seems like a small thing, but read on and try to find a Tea Party with this in hand.
Even with this law the BANKS ARE FAILING. This law is a joke, its clear purpose is to make banks extra cash on certain transactions. It clear purpose is to limit the movement of money since big brother has to watch every transaction. If this was about liquidity, then what stops a run on a failing bank, certainly not this law. Personally I dont want to find out how FDIC insurance works, I just want my saving out before they close their doors because they made bad loans. Oh wait I forgot, the new solution is BIG BAILOUTS.
A federal reserve NOTE is not our money, its not anything. Boycott the FED!
A federal reserve NOTE is not our money, its not anything. Boycott the FED!
I just got burned by this. I keep all my money in my savings account until I need to use it, because if it’s in my checking account I’ll spend it. So I transfer funds to my checking whenever I set up online bill payer to pay a bill, or when I know I will need to get money from the ATM. I’m lucky that my credit union is only charging a dollar and not shutting me down. But my representative told me to just make a lump sum transfer (why is that better?) or if I call the credit union and they transfer the money, that’s okay too. She also said that they only started enforcing this as of Jan 1 2009 since the Feds started enforcing it. Something about how the Feds think that more than 6 transfers out of savings is a sign of money laundering? Silly me for wishing they would have informed their customers.
[...] or transfers per statement cycle. This limit is true on all savings accounts because there is a six transfer/withdrawal limit mandated by federal regulations. So many people, myself included, run into this problem with online accounts and it’s mostly [...]
Come on. This rule is ridiculous. I can take transfer $2000 out of my savings at once and that’s just fine, or transfer it in small chunks as needed (which I did), and get smacked for it. What difference does it make if it’s all at once or as needed? The bottom line is still the same. And why is an online transfer different than walking into the bank or going to the ATM. Most important, how do we get this changed?!!!!
It used to be four. Share account do apply. That is why I get a checking account with no interest at a bank and no money market account. One comment, withdrawing the money directly from the teller or your banks atm is not suppose to count against the 6 withdraw limit.
However, I think they are trying to change this rule. Small debit card transactions under $50 maybe allowed without restriction. The rule has not changed yet.