Fed Meeting: Downshift to 25-bp Rate Hike - Strategies for Savers
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Fed Meeting Preview and Deposit Rate Forecast - January 24, 2023Excessive Withdrawal Fees from Bank of America, Citi, Wells Fargo and Ally
A common fee for savings accounts is the excessive withdrawal fee. This was one of the five common banks fees that I mentioned yesterday. In many cases, banks are just abiding by federal regulation that limits the number of allowed withdrawals from money market and savings accounts. However, in other cases some banks charge fees when the number of withdrawals is less than this limit.
First, there was an important change last year to the federal regulation that governs withdrawals on savings and money market accounts. The number of withdrawals per month allowed by check from money market accounts was increased from 3 to 6. Here's an excerpt from the Federal Reserve press release that was issued last year:
The Board has revised Regulation D's restrictions on the types and number of transfers and withdrawals that may be made from savings deposits. The final amendments increase from three to six the permissible monthly number of transfers or withdrawals from savings deposits by check, debit card, or similar order payable to third parties. Technological advancements have eliminated any rational basis for the distinction between transfers by these means and other types of pre-authorized or automatic transfers subject to the six-per-month limitation.
All of the details of Regulation D are located here, and the details specific to savings and money market accounts are in Section 204.2.
Some banks still maintain the 3-per-month limit for checks. The regulation does not require banks to allow 6. They're just not permitted to allow more than 6. So you may still be charged fees if you write 4 to 6 checks from your money market account.
I've reviewed the withdrawal policies for savings and money market accounts from four large banks. In summary, Bank of America starts charging fees after only 3 withdrawals from its regular savings account. Citibank still states that its policy is that no more than 3 of the six withdrawals can be made by check. Both Wells Fargo and Ally Bank allow the maximum number of withdrawals permitted by Regulation D. Over that limit, both start to charge a fee. I've included the details below:
- Bank of America - Regular Savings Account has an excessive withdrawal fee of $3 for more than 3 withdrawals per month if your minimum balance is less than $2,500 (It's based on rules for Texas. It may vary by state.)
- Citibank - The Savings Comparison page states the following regarding the transaction limitations:
Regulation D limits the number of certain types of transactions that you can make from your savings or money market accounts to six per statement period. For money market accounts, Citibank's policy is that no more than three of those six transactions can be made by check.
- Wells Fargo - The Money Market Savings page has the following small print:
Regulation D limits certain types of withdrawal and transfer transactions you can make out of your savings or money market accounts to a maximum combined total of six (6) per month or monthly statement period. An Excess Activity Fee may apply for each transaction that exceeds the limit.
- Ally Bank - In Ally's money market account page, they list a $10 fee for each transaction exceeding 6 per statement cycle. They mention the following regarding why it's 6:
We'd give you more if we could. The limit is actually set by federal law for electronic and telephone transactions from all U.S. savings and money market accounts. Remember deposits are unlimited.
Your "savings deposit" account type is defined here, and so is the six-witdrawals-per-four-weeks limit. It is also true that ATM withdrawals are exempt, as are withdrawals made by mail and by teller.
I was about to close my Bank of America accounts over this, but it looks like the Feds are to blame, and I'd have this very same problem no matter what institution kept my money.
I had 3 transfers to checking and 2 ATM withdrawals. Good to know that ATMs are not supposed to count as excessive transfers.... at least I have my argument for next time. I'll be studying the law. What the heck is the Federal Reserve thinking!!!! I'm gonna dig a hole in my back yard and keep my own money. This is financial suppression and slavery !
Here is a secret tip: So long as you transfer at least $25 every month from checking to savings, the monthly $12 checking account fee is waived. I set this up on auto-pay every month.
And it makes no difference if you take them money right back out again.
I started doing that five years ago and have paid NO FEES whatsoever to Bank of America.
Again, a SAVINGS account is for SAVING. If you start using it like a checking account, they will charge you fees. You can have BOTH savings and checking accounts and transfer money online between the two.
Is there some reason you are using a Savings account as a checking accout?
http://www.federalreserve.gov/boarddocs/supmanual/cch/int_depos.pdf
"Other, less-convenient types of transfers, such as withdrawals or transfers made in person at the bank, by mail, or by using an ATM, do not count toward the six-per-month limit and do not affect the account’s status as a savings account."
http://www.federalreserve.gov/boarddocs/legalint/FederalReserveAct/1997/19970320/
"As it is generally more convenient to make a transfer at home than to go to a branch, withdrawals or transfers in person at a branch are unlimited. Withdrawals from an ATM machine, which involve more inconvenience than home banking, and transfers by mail or to repay loans from the institution (other than overdrafts), are also unlimited."
http://www.federalreserve.gov/boarddocs/legalint/federalreserveact/1997/19970121/
"The definition specifically excludes from the three and six per month limitations arrangements that permit 'transfers of funds from [the savings] account to another account of the same depositor at the same institution or permits withdrawals (payments directly to the depositor) from [the savings] account when such transfers or withdrawals are made by mail, messenger, automated teller machine, or in person.' Id."
I mention these because Chase Bank has started charing excessive ATM "Savings withdrawal Limit Fees" of $5/transaction for each transactino over 6/mo, when it appears ATM withdrawals are specifically EXCLUDED from said maximums... Evil corporation. How I dislike thy practices...
If anyone else is getting dinged for ATM withdrawals by Chase, or really any other bank, they can't hide behind Regulation D, 'cause it appears to specifically exclude ATM withdrawals, in-person withdrawals from a teller, etc. The less-convenient methods of utilizing your money (vs. online banking from home, telephone transfers, etc.).
Good to know?
The converse is also true, they're not required to charge a fee after 6 if they don't want to. However, they are required to discourage the practice, and the Fed agrees that charging a fee accomplishes that end. However, even if you pay the fee, there comes a point that if you exceed the limit month after month, the bank is required to convert your savings account to a transaction (checking account) or close the savings account to make you stop exceeding the limit.
I can see if I withdrawn 3 time but putting money they charge a fee wtf?
http://en.wikipedia.org/wiki/Regulation_D_%28FRB%29
and it has to do with bank reserves. Sounds silly considering you can get at your money one way or another but...
That is the difference between a savings and a checking account: you're supposed to save money in a savings account, i.e., leave it there and (hopefully) let it accrue interest - for multiple withdrawals and other transactions you have a checking account. DUH!
I'm sure when you read the small print, you'll find some paragraph explaining things.