Regulation D is a Federal Reserve Board regulation that defines what a transactional and non-transactional account is. In addition, Reg D places withdrawal limits on non-transactional accounts. The savings and money market accounts that you have at your bank are non-transactional accounts, while your checking account is considered a transactional account.
Reg D places a limit of 6 withdrawals per month on withdrawals not done in person, using an ATM, or by mail.
The following transfer/withdrawal types from your savings or money market account count against the Reg D limit:
– Transfers using internet/telephone banking.
– Phone transfers when you talk to a representative at your bank.
– Overdraft transfers to cover a check from your checking account.
– ACH / electronic payments being made to somebody other than your bank.
Many rely on the money that is in their savings account to cover checks in case their checking account is overdrawn. For example, at my financial institution, I have my savings account set up as an overdraft source for my checking account. However, when money is automatically pulled from my savings account to cover a payment coming from my checking account, that counts as a Regulation D transaction. Once I reach 6 Reg D transactions in a month, then my savings account will no longer be used as an overdraft source for the rest of that month, causing me to receive NSF fees and returned payments if I do not have sufficient funds in my checking account.
Reg D can also adversely affect you if you use your savings account to make ACH payments to others. Once you reach the Reg D limit, ACH payments will not be honored from your savings account. This in turn may cause you to receive late payment and returned item fees from the businesses that you are paying.
It is best to avoid using a savings or money market account to electronically pay your bills. In addition, if you use your savings account as an overdraft source, be aware of the Reg D limit and plan accordingly to avoid paying fees.