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Transfer Limits — It’s a Government Thing

Imagine this scenario: Your cash on hand is running short one month, and you’ve gone online several times to make transfers from your savings account. No problem, until the seventh time when you’re suddenly charged a penalty and get a warning that you have exceeded allowable transfers for the period. But isn’t this your money to access as you see fit? What’s up with that?

Contrary to what many credit union Members perceive, those withdrawal limits are not set by your credit union. They trace back to the federal government, and what is known as its Regulation D rule. The Federal Reserve Board implemented Reg D as a way to help ensure that banks and credit unions have sufficient reserves on hand, and to encourage consumers to use savings accounts for their intended purpose of saving money.

Bank customers and credit union Members are limited to six transactions per month on most types of withdrawals from savings and money market accounts. Exceed that, and the financial institution can charge a fee, convert the account to a checking account, or close it altogether. (Great news: Many credit unions, including University Federal Credit Union, do not charge a fee. So UFCU Members won’t incur any fees, but they are not allowed more than six transfers per month to remain in compliance with Reg D.)

Transactions Affected by Reg D
Regulation D applies to the following types of activity in your savings or money market accounts (and are thus limited):

  • Transfers made through Online Banking
  • Transfers made through an automated Phone Banking system
  • Automatic payments, like a monthly car payment
  • Overdraft transfers
  • Transfers made by check or debit card that are made payable to third parties
  • Transfers made by a Member Services representative on your behalf who has received your permission by phone

Exceptions to the Reg D Rule
There are always exceptions to any rule, and Reg D is no different. In general, the Regulation D limit does not apply to transactions that you make in person. Consider the following work-arounds to access your savings and money market funds without triggering the Reg D six-withdrawal limit:

  • Withdraw or transfer funds at your financial institution’s ATMs
  • Handle the transaction in person at one of your financial institution’s physical locations
  • Request funds by mail, express drop, or night drop with your original signature
  • Use the withdrawal or transfer to make an in-person loan payment to your financial institution

How to Avoid Account Transfer Penalties
None of us wants to pay an unnecessary penalty, and there are easy ways to avoid them. Consider these tips for not incurring transfer fees:

Make a Plan
Plan your cash needs in advance for the month whenever possible. If you anticipate you’ll need to pull funds from savings, it’s better to err on the high side rather than running short and having to make another transfer. Remember, there’s no limit on the number of deposits you can make, so what you end up not needing can be redeposited easily.

Rely on Checking
Avoid using savings accounts for automatic bill payments, because they count toward your six allowable transactions. Instead, rely on your checking account to handle those pre-authorized payments.

Monitor Your Accounts
Keep an eye on your checking account balance. If you have automatic overdraft protection from your savings account to your checking account, it is a good idea to set up low-balance alerts to avoid needing overdraft transfers. Even though you technically did not make the withdrawal or transfer, those automatic transfers fall within the Regulation D rule.

Take Advantage of the Exceptions
When you do need funds, use one of the methods not limited by Reg D. If in doubt, check with your financial institution. They should be happy to help.

Consult Our Financial Experts
Give us a call, or stop by your local financial center anytime to chat with a Personal Financial Representative and learn more.