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Home >> Accounts >> Savings Accounts
Online Withdrawal Restrictions
Is there a federal regulation that restricts online withdrawals from a savings account to a maximum of six per statement? What types of penalties are imposed if this limit is exceeded?
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 Yes, there is such a regulation. All banks, savings associations, and credit unions are subject to Federal Reserve Regulation D, which defines types of deposit accounts. The definition of savings account, which includes statement and passbook savings and money market deposit accounts, includes restrictions on transfer activity from an account (transfers to the account are unlimited), either to other accounts of the account holder, or to third parties.
Restricted transfers are limited to six per month (no more than three of those six can be by check, debit card or similar mechanism, payable to third parties). The restrictions apply to transfers made automatically between a customer's accounts, or authorized by telephone (including fax) or other electronic transmission (that's where the online application enters). Transfers initiated in person (including by customer messenger) or at an ATM are not restricted by the regulation.
As a rule of thumb, transfers from the account that you can initiate from home or office (or, by extension, by mobile telephone) -- without having to go to the bank or an ATM -- are subject to the restrictions. When you go to the bank or an ATM (any ATM, by the way) to initiate the transfer, it's not counted.
Banks are free to impose additional contractual restrictions on transfer activity, but they cannot lift the regulatory restrictions without making the account a checking (including NOW) account, which usually earns less (if any) interest. Banks are subject to regulatory orders and penalties if they fail to control customer transfers from savings accounts to stay within the regulatory limits. They are permitted to work with customers to achieve that goal, but must close or convert accounts when customers are unable for whatever reason to conform.
The regulation imposes no penalty (other than account termination or conversion) on customers who fail to restrain their transfer activity. However, banks can impose fees for extra activity as part of their controls to encourage customer conformity to the transfer restrictions.
Published on BankingQuestions.com 7/11/07
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