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.