Impact of Federal Regulation D on Electronic Transfers

A note from Slug:  I'm not a big fan of guest posts.  I regularly turn them down because they are almost always more work than their worth.  This is not the case with the current guest post.  I had been planning on writing a post on the insanity of Regulation D for 8 months.  She took the idea, researched it, and wrote a good post in 8 days.  Thanks Noreen!


With advances in technology, how we handle our money has evolved from a hands-on to a more hands-off experience. More Americans are managing their finances over the internet, moving funds and making banking transactions with the simple click of a computer mouse or tap on a smartphone. The changes are coming so fast that security measures are sometimes less than adequate. In an effort to help protect consumers, the Federal Reserve has enacted regulations that cover how electronic transfers are managed.

Some of these regulations are helpful.  For example, consumers have been saved a great deal of grief from the passage of Regulation E. This the law limits the liability for unauthorized transactions and regulates electronic file transfers (EFTs) including ATMs, direct deposits, telephone transfers, point-of-sale terminals, pre-authorized withdrawals and other transfers. Banks are required to clearly explain their policies and federal regulations relating to EFTs and give a 21-day notice of changes, thanks to Regulation E.

But others such as Regulation D isn’t as popular and has quite a few critics. It was enacted to prevent consumers from using savings accounts and other share accounts as checking accounts. It limits automated withdrawals from non-transactional accounts. The details include:

  • No more than six (6) pre-authorized, phone, automatic or check withdrawals or transfers in any combination are permitted from a savings account per month. Transfers and withdrawals include overdraft protection transfers, EFT transfers/withdrawals, debit card transactions, home banking, telephone and fax transfers.
  • Transfers out of savings accounts to loans, transfers into savings accounts, and transfers into or out of checking accounts are unlimited.
  • Once you’ve reached the limit, you’ll be locked from further EFTs.
  • An unlimited number of withdrawals or transfers are permitted when:
  • Made in person at the bank
  • Request made by a mailed letter
  • Made at an ATM
  • The member is paying a loan they have with the bank
  • Made from a checking account

Impact of Regulation D on Consumers

The limit of six transactions a month was set in the 1980s when internet banking was still a new concept. It’s estimated that between 500 million and 1 billion people will use mobile technology to access financial services by 2015. So the potential for Regulation D to cause problems would seem obvious, especially when convenience is at a premium and more people are doing their banking on the fly. Here are the risks:

  • Returned Unpaid – If you’re not keeping track of the number of transactions you’ve made during the month and make an online payment from your savings account, you may be shocked to find that the bill wasn’t paid because your six transactions were used up. There would have been no problem, however, if the payment had been made from your checking account.
  • Automatic Payments – Make too many payments from your savings account and automatic payments set up to come from your savings may not be honored; you may find you’ve missed this payment, as well.  

Tips to avoid Regulation D Limits:

  • Set up your pre-authorized payments or automatic withdrawals to be taken out of your checking account, which is not subject to Regulation D.
  • Set up your overdraft protection to access an overdraft line of credit or a credit card as a safety net, instead of your savings account.
  • Limit transfers from your savings by making planned transfers in larger amounts instead of several small transfers.
  • Use an ATM to transfer funds within your account. 
  • Monitor your accounts frequently to plan your transfers and control the movement of your money.

About The Author: Noreen Ruth writes for ASAP credit card blog and several popular finance websites. She is interested in educating consumers about using credit responsibly and about legislative action that will affect their ability to borrow the money they need. She has contributed hundreds of articles to various online sites that provide content to educate consumers on credit cards, debt relief services, loans and other finance related topics.

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