If you have a savings account, you may be limited to no more than six "convenient" withdrawals or transfers per month from the account free of charge.
If so, blame your bank, not the Federal Reserve. The Fed, which had long imposed this limitation on savings accounts withdrawals, lifted it in 2020. But it allowed financial institutions to continue with the restrictions if they so choose, subject to rules requiring timely disclosure of such limits to prospective customers. Many banks continue to charge customers for exceeding the monthly limit.
Key Takeaways
- The savings account withdrawal limit is no more than six per month and applies to transactions such as overdraft and bill-pay transfers and debit card transactions.
- Some withdrawal types, such as visiting a teller in person, don't count toward the limit.
- The primary reason for the limit is that banks only hold a small percentage of consumers' deposited funds in reserve.
- The federal government insures the money you deposit in your bank up to $250,000 per depositor.
Why Might There Be a Savings Withdrawal Limit?
As recently as 2020, the monthly limit of six "convenient" savings account withdrawals wasn't within the bank's discretion at all, but rather a requirement imposed by the Federal Reserve to distinguish savings deposits from transaction accounts.
Until March 2020, transaction account deposits (primarily to checking accounts) in the U.S. were subject to reserve requirements for the financial institution, while savings deposits were not.
The Fed's Regulation D defined savings deposits, in part, as those limited to six convenient withdrawals monthly. This prevented banks from classifying transactions accounts as savings deposits in order to potentially lower the amount of reserves they were required to keep on deposit with the Fed.
In 2019 the Fed announced it would conduct monetary policy in a regime based on an ample supply of reserves. In 2020 it eliminated the reserve requirements entirely, noting they no longer played a significant role in the ample reserves framework.
Liquidity and capital buffer ratios had supplanted reserve requirements as the primary tools of banking regulators. In the wake of the Global Financial Crisis, banks accumulated reserves well in excess of what was required by reserve ratios.
Once the Fed abolished reserve requirements, it was only a matter of time (about a month, in fact) before it took the logical next step and dropped the requirement limiting "convenient" withdrawals from savings accounts to six a month. The U.S. central bank noted the distinction was no longer necessary for banking regulation, and also cited bank customers' increased need to access deposits remotely given the bank branch closings in the early stages of the COVID-19 pandemic.
Thanks to the rule change, banks are no longer required to prevent customers from making more than six monthly "convenient" withdrawals from savings accounts. Nor are financial institutions now required to follow up with those exceeding the limit on more than an occasional basis, preventing further violations by stopping withdrawals and transfers, transferring the funds to a transaction account, or closing the savings account altogether.
But while the Fed freed banks from policing withdrawals and transfers from savings, it made clear they could continue to limit them or to charge fees for exceeding the six "convenient" transactions limit if they so choose. Many large banks continue to charge such fees.
There are no limits to the number of deposits you can make to a savings account.
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What Are Convenient Transactions?
Money transfers you make online, by phone, through bill pay, or by writing a check are considered convenient, but certain other withdrawal types don't count toward the limit.
Under the previous version of Regulation D, the Fed-imposed six-per-month limit applied to these types of convenient savings account transactions:
- Overdraft transfers
- Electronic funds transfers (EFTs)
- Automated clearing house (ACH) transfers
- Transfers or wire transfers made by phone, fax, computer, or mobile device
- Checks written to a third party
- Debit card transactions
Which Transactions Did Not Apply to the Savings Withdrawal Limit?
Under the old version of the Fed's regulation D, the following savings accounts transactions were not deemed "convenient," and excluded from the limit of six per month:
- Withdrawals made at the teller window of a bank branch
- Withdrawals from an ATM
- Transfers from savings to checking at an ATM
- Asking your bank to send you a check
It's important to understand that these distinctions always applied to the way banks classified their deposits for the purposes of calculating reserve requirements, rather than as a basis for the fees they charged, and in many cases continue to charge.
For example, Chase Bank charges a $5 monthly fee for the first three savings accounts withdrawals and transfers in excess of six during the monthly statement period, including withdrawals made at a branch or an ATM.
How to Avoid Withdrawal Limits
If you expect to use your savings to make more than six transfers or payments in a given month, make one larger transfer from your savings to your checking account and then conduct your transactions out of your checking account.
Why Are Savings Account Withdrawals Limited to Six Per Month?
The Federal Reserve no longer requires banks to do so in order to distinguish between savings deposits and transactional accounts for the purpose of calculating reserve requirements. However, many banks continue to charge a fee, preserving the distinction between interest-bearing savings accounts and checking accounts that typically don't earn interest.
How Do Banking Regulations Define a Savings Account?
Recent amendments to Regulation D haven't changed its definition of a savings deposit, in part, as one for which the bank reserves the right to require a seven-day advance notice for withdrawals. In practice, this right is almost never invoked, since the Federal Deposit Insurance Corporation (FDIC) typically takes control of troubled banks before they have to resort to this restriction.
What Happens When You Exceed the Limit?
If you occasionally exceed the limit, your bank may decline your excess transactions or charge you a fee. If you exceed that limit often, some banks may convert your savings account to a checking account or close it altogether.
Bottom Line
A limit of six withdrawals per month shouldn't matter if you use your savings account as intended—mostly to make deposits and accumulate funds. If you make most of your outgoing transfers and withdrawals from a checking account instead of a savings one, you'll avoid many fees. If making frequent withdrawals is necessary, try making one or two larger transfers from savings to checking instead of six or more smaller ones.
