What Is the Federal Reserve’s Regulation D?

If you’ve ever made an electronic withdrawal or transfer from a savings account, you may have gotten a notice reminding you that you’re limited to making just six of those transactions per month. That rule stems from a federal regulation: the Federal Reserve’s Regulation D. Up until April 2020, it mandated that banks impose these limits.

Learn more about what Regulation D is all about, why it’s been temporarily suspended, and what that actually means for you as a consumer.

What Is Regulation D?

The Federal Reserve’s Regulation D is a federal mandate that limits consumers to making just six “convenient” withdrawals or money transfers each month from savings accounts and money market accounts. Normally, if you go beyond the limit, you face fees or possible account closing.

The rule encourages people to use checking accounts for everyday transactions such as paying bills, while using their savings and money market accounts as tools to keep larger sums of money secure. That helps banks maintain an ample amount of reserves.

Alternate definition: According to the Federal Reserve’s guidelines, Regulation D “specifies how depository institutions must classify different types of deposit accounts for reserve requirements purposes.”

Alternate name: Reg D

How Does Regulation D Work?

Regulation D is really all about designating certain consumer bank accounts—money market and savings accounts—as a means for people to store their money for the long term. By limiting the number of transfers and withdrawals per month, the regulation prevents consumers from using these accounts to pay bills or conduct other everyday activities. After all, that’s what checking accounts are for.

The Federal Reserve’s goal is for these accounts to remain mostly untouched and stable so banks can have ample funds in reserve.

To enforce the rule, banks are obligated to let their customers know which transactions are limited. The list of “convenient” transfers that are restricted includes things such as:

• Third-party or ACH payments (such as through services like Zelle)
• Online transfers to another bank account (even if it’s at the same bank)
• Payments via debit card or check
• Automatic, preauthorized transfers or withdrawals
• Overdraft protection withdrawals from a linked checking account

The limit only applies to convenient transfers. Account holders may withdraw cash via ATM, or by visiting a bank branch, without limit.

Should a customer go over the six allowable transactions, they will incur fees—usually around $5 to $10. The bank can also reclassify the account as a transaction account. In other words, the bank can force the account to close and can turn it into a checking account instead, possibly costing you interest.

Regulation D Pros Explained

• Helps account holders save more: The purpose of savings and money market accounts is to keep your cash safe and to keep adding funds. The more inconvenient it is to take out cash, the less tempting it will be to do so.
• Protects bank reserves: Helping people save is nice, but the real motivation for Reg D is to prevent banks from running out of reserve funds. Since customers want to be assured their money will be there when they need it—and that the bank remains solvent—that helps everyone.

Regulation D Cons Explained

• Fees incurred or account status changed if you exceed the limit: Don’t plan to use your savings or money market for bill paying or other high-frequency transactions, because banks can charge fees or change the account into a checking account if you exceed transaction limits.
• Despite the temporary federal rule suspension, banks can still maintain the limit: Even with Reg D on pause, individual banks can enforce the six-transactions-per-month rule if they wish—they just can’t blame the Federal Reserve for it.
• Overdraft protection withdrawals from a linked checking account count: If you overdraw on your checking account and use your savings as a backup, that counts toward the six-transaction limit.

Why Did the Federal Reserve Pause Regulation D?

When the COVID-19 pandemic brought an economic crisis, the Fed decided to pause Reg D as of April 24, 2020. That means there are currently no limits on transfers and withdrawals from deposit accounts as far as the Federal Reserve is concerned.

However, the rule still allows banks to keep the rule if they wish. The idea is to allow banks to give their customers more convenient access to their funds.

Especially during a time when people are discouraged from venturing out to visit bank branches in person, being allowed to conduct transactions digitally without worrying about reaching a limit makes sense. It's also more likely during this time that overdraft protections might be used more frequently. For those reasons, the Credit Union National Association (CUNA) was one of the groups that pushed the Federal Reserve to suspend the rule.

As of now, there is no planned date for Regulation D to be reinstated.

How Changes to Regulation D Affect You and Your Savings Account

Regardless of Regulation D’s pause, banks still decide whether or not to maintain and enforce account withdrawal limits. The key difference is that if they still wish to charge fees, it’s no longer because the Fed is imposing the rules.

Some banks are proceeding with business as usual, so it’s best to pay attention to your notifications or contact your bank and ask about withdrawal limits or fees. 

Your best bet, if you anticipate needing funds from your deposit accounts, is to figure out how much you need, then make one large transfer to your checking account, where withdrawals aren’t limited.