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The Best Little Money Book

Tip of the Month

You need to understand Regulation D

Recently a client let us know that she had received a letter from her bank stating that she had gone over the limit for transactions and that if she continued to do so the bank would change her money market account into a checking account.

Regulation D, a Federal Reserve regulation, allows only six transactions from either a savings account or a money market account in each statement cycle (not per month). This means you allowed to move money out of the account only six times in a statement cycle. This includes withdrawals, transfers to another account, bills paid by per-authorized deductions or through bill pay and checks written on the account.

Both electronic deductions and checks are included in the transaction count. If the withdrawals are made by mail, in person at a branch of your bank or at one of their ATMs, they do not fall under Regulation D.

You can transfer money into your savings or money market accounts as often as you wish but you can only take money out six times. One reason for this is that these accounts are interest bearing accounts.

Checking accounts are not included in Regulation D. This is because checking accounts are demand accounts; you can withdraw (i.e., demand) money at any time in any way – transfers, ATM, checks, bill pay and pre-authorized deductions. There is no limit to the number of transactions you can make from a demand account.

To avoid problems, put your direct deposits into your checking account and pay all bills out of this account and transfer money into an interest bearing account and pre-authorized debits. Remember transactions made in person do not count.