All You Need to Know about Regulation D in Banking

Historically, banks restricted the number of monthly transactions in savings and money market accounts, but a rule change during the pandemic has eased access to these funds.

Regulation D, a Federal Reserve Board rule, previously capped withdrawals and transfers at six per statement cycle. While the Fed revised this rule, many banks have kept the six-transaction limit, though some have increased the number of allowed transactions.

What is Regulation D?

Regulation D imposed reserve requirements on a bank’s deposits and liabilities to help implement monetary policy, according to the Federal Reserve. In March 2020, these reserve requirements were reduced to zero percent and have stayed at that level for over three years.

Reg. D also limited the number of certain withdrawals and transfers from savings accounts during each statement cycle. While banks are no longer required to enforce the six-transaction limit, many continue to restrict withdrawals from savings accounts.

How has Regulation D changed?

In April 2020, as the economic impact of the coronavirus pandemic unfolded, the Federal Reserve removed the six-per-month withdrawal limit on savings deposit accounts through an interim final rule. Some banks, like American Express National Bank, embraced this change by eliminating withdrawal limits altogether. Previously, American Express allowed nine withdrawals per statement cycle but now has no such restrictions.

The Fed’s interim final rule bypassed the usual proposal process due to the urgent circumstances, explains Scott Birrenkott, assistant director of legal at the Wisconsin Bankers Association. However, this rule isn’t permanent yet.

“The Fed still hasn’t issued a final rule,” Birrenkott notes. “Some banks are waiting for clarity before fully adjusting their policies, in case the rule changes or is reversed.”

Types of transactions impacted by Reg. D

Under Regulation D, checking accounts are classified as transaction accounts, intended for day-to-day use like bill payments and purchases. There are no limits on the number of transactions you can make with a checking account. In contrast, savings and money market accounts—referred to as savings deposit accounts—are categorized as non-transaction accounts, designed primarily for saving money.

Before April 24, 2020, Reg. D required banks to limit certain types of transfers and withdrawals from savings deposit accounts to six per statement cycle, though some banks still enforce this limit today.

Since checking accounts are intended for frequent use, they typically don’t have withdrawal restrictions. Savings and money market accounts, however, are meant for saving rather than frequent transactions.

Examples of transactions that were limited under Reg. D for savings and money market accounts include:

• Withdrawals by official bank check
• Outgoing wire transfers
• Debit card purchases (mainly for money market accounts)
• Automated Clearing House (ACH) payments for bills or transfers to individuals
• Withdrawals via payment services like Zelle
• Transfers from savings to cover overdrafts in a linked checking account

Exceptions to Reg. D restrictions

Withdrawals made at ATMs or with a bank teller are not subject to Regulation D limits. These transactions generally do not count toward the six-transaction limit imposed on savings and money market accounts.

Why it pays to know about Reg. D

Knowing the limits imposed by Reg. D is crucial when selecting a savings or money market account. If you expect to make frequent transfers or withdrawals, a savings account with stringent limits might not be ideal. Conversely, if you find a bank offering many or unlimited withdrawals, it could be a better fit for your needs.