Why is there a limit of 6 ACH transfers per month with savings accounts?

Did you know that you're limited to just six (6) transfers into and out of a savings account each billing cycle?

If you go over, you could get in trouble. Most banks will even fine you.

Bank of America calls it a Withdrawal Limit Fee and will ding you $10 for each withdrawal or transfer above six (limited to $60). Unless you have a minimum daily balance of an amount that varies with each savings account type. Their Regular Savings requires a minimum daily balance of $20,000 to avoid this fee. (fee schedule, it's on page 4)

Ally Bank will charge you $10 per transaction over the limit. There's no way to avoid it, just in case you had $20,000+ lying around and a desire to make more than six transfers a month you crazy cat you.

Six seems like a lot but if you have unlimited overdraft protection, which is an automatic transfer, it could happen pretty easily (that's how I discovered this limit and fee!).

Why does this six transfer limit exist?

It exists because your account is considered a “savings deposit” and they're subject to different rules.

Why those rules exist has to do with the reserve requirements, or how much the bank needs to keep around in their vaults, on different accounts. The rules regarding those requirements gets complicated and are updated each year depending on what the Fed is hoping to accomplish, so I won't go into it (and it's not relevant).

Section 204.2(d)(2) of Regulation D of the Federal Reserve Board’s definition of a “savings deposit” defines the limit:

You can see it quoted here in a letter from the Federal Reserve in 1996. It's also repeated again in this document, which is far easier to read than the regulation.

A few additional points:

• The limit is only on “convenient” transfers and withdrawals, like preauthorized or automatic transfers.
• It's only a limit on your savings account. You can have an unlimited number of transfers from a checking account.
• Not in the above quote but “institutions must reserve the right at any time to require at least seven days’ written notice of an intended withdrawal (in practice, this right is rarely, if ever, exercised).” Technically, you can request a withdrawal and they can sit on it for 7 days!

What counts as a transfer?

Anything “convenient” counts towards this limit of six.

A “convenient transfer or withdrawal” is:

• Preauthorized, automatic transfers (including overdraft protection and bill payments)
• Initiated by phone, fax or computer
• Made by check, debit card, or other similar order made by you to a third party.

It feels a little arbitrary what convenient means but that's the rule.

How to get around this limit

Make bigger, but fewer, transfers? Then you don't hit six and six is a lot.

Or, you can make “unlimited withdrawals by mail, messenger, ATM, in person, or by telephone (via check mailed to the depositor).” These aren't considered convenient and don't count against the limit.

If you need to make a transfer, you could withdraw it from the ATM from savings and then deposit it into checking. Or you could walk up to a teller and make the transfer.

Why the fee?

Because a bank can? And because it makes it so you pay attention?

If they keep letting you go over the 6 transfer limit, they have to reclassify it as a transaction account… which is a pain. They would much rather you not go over but until you learn, they'll happily collect ten bucks a pop.

Now you know why there is a six transfer limit – go impress your friends. 🙂