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How to Start Saving MoneyFederal Reserve Changes Reg D To Allow 6 Checks Per Month in Money Market Accounts
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ON BY Ken Tumin
One downside to money market accounts and savings accounts as compared to checking accounts is that you are limited in the number of third-party withdrawals. This is based on the Federal Reserve's Regulation D. In short, Reg D limits the number of electronic withdrawals (like ACH transfers) to 6 per month. However, checks were limited to only 3 per month. This check limit has now changed. Effective July 2, 2009, the check limit is now the same as the other types of withdrawals. In the Federal Reserve's May press release, it described this final amendment to Reg D:
I'm surprised it took me this long to notice this change, but it looks like I'm not alone. I haven't seen any banks make this change to their policies. For example, Ally Bank still lists the old 6-3 withdrawal limitation:
It should be noted that banks are not required to allow 6 checks per month. They can continue their same policy as long as they want. This is one reason the Federal Reserve didn't delay this new rule. So before you try to write more than 3 checks in one month from your MMA, make sure you verify with your bank that you won't be hit with a fee. If they claim you're only allowed 3 per month due to federal regulation, let them know that Reg D has changed. I've already mentioned this to an Ally Bank representative.
Savings Account vs. Money Market Account vs. Money Market Fund
There has always been confusion between the definitions of these terms. First, a savings account and a money market account are technically the same. Both are bank deposit accounts that are FDIC insured, and both have the same Reg D limitation.
Traditionally, money market accounts have larger minimum balance requirements than savings accounts. Also, money market accounts typically offer limited check writing whereas savings accounts do not. However, I've seen many cases of banks offering money market accounts that don't have check writing. So these differences are not rules.
Money market fund should not be confused with a money market account. A good explanation of the difference is described in this Bankrate article:
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.
I'm surprised it took me this long to notice this change, but it looks like I'm not alone. I haven't seen any banks make this change to their policies. For example, Ally Bank still lists the old 6-3 withdrawal limitation:
Why only 6 transactions per statement cycle?: 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. If you have a Money Market Account, only three of the six-per-cycle withdrawal or transfer may be made by check or with your check card at point of sale. Please remember, you will be charged a $10 fee for each transaction that exceeds these limits.
It should be noted that banks are not required to allow 6 checks per month. They can continue their same policy as long as they want. This is one reason the Federal Reserve didn't delay this new rule. So before you try to write more than 3 checks in one month from your MMA, make sure you verify with your bank that you won't be hit with a fee. If they claim you're only allowed 3 per month due to federal regulation, let them know that Reg D has changed. I've already mentioned this to an Ally Bank representative.
Savings Account vs. Money Market Account vs. Money Market Fund
There has always been confusion between the definitions of these terms. First, a savings account and a money market account are technically the same. Both are bank deposit accounts that are FDIC insured, and both have the same Reg D limitation.
Traditionally, money market accounts have larger minimum balance requirements than savings accounts. Also, money market accounts typically offer limited check writing whereas savings accounts do not. However, I've seen many cases of banks offering money market accounts that don't have check writing. So these differences are not rules.
Money market fund should not be confused with a money market account. A good explanation of the difference is described in this Bankrate article:
A money market account, or MMA, is an interest-earning savings account offered by a FDIC-insured financial institution with limited transaction privileges.
[...]
In contrast, a money market mutual fund, or money fund, carries no FDIC insurance and is simply a collection of short-term debt investments held by that mutual fund.
