Limit of Six Withdrawals from Savings Accounts
Did you know that the Federal Reserve limits certain transactions on your savings account(s)? Well, they do. And guess what? This morning, I received the following e-mail from ING Direct:
Based on recent activity in your Orange Savings Account, we want to remind you that you cannot make more than six withdrawals from your account each month. This is a federal regulation that all banks are required to follow for savings accounts like this one, so if this type of activity occurs more than three times in any 12-month period, we will have to close your account.
We don’t want that to happen, so here’s what you can do to prevent your account from being closed:
- Take a look at your statements or go to ingdirect.com and review your account activity.
- Keep track of how many times you transfer money out of your Orange Savings Account, including transfers to other ING DIRECT Accounts, and make sure you’re not making more than six withdrawals each month.
- Make one or two larger transactions rather than moving money numerous times. This will reduce the number of withdrawals you make each month.
Give us a call at 1-888-464-0727 if you have any questions.
Save Your Money.
Apparently we approached (or surpassed, I haven’t checked) the six transaction limit last month, which triggered this message. If you’re interested in exactly what types of transactions count against the limit, check out this passage from Section 204.2(d)(2) of Regulation D of the Federal Reserve Board:
…the depositor is permitted or authorized to make no more than six transfers and withdrawals, or a combination of such transfers and withdrawals, per calendar month or statement cycle… to another account (including a transaction account) of the depositor at the same institution or to a third party by means of a preauthorized or automatic transfer, or telephonic (including data transmission) agreement, order, or instruction, and no more than three of the six such transfers may be made by check, draft, debit card, or similar order made by the depositor and payable to third parties.
In plain English, courtesy of GenXFinance…
Transactions that are limited:
- Pre-authorized transfer to a third party
- Pre-authorized payment to a third party (ACH)
- Pre-authorized transfer to an individual’s own non-loan account
- Transfer for overdraft protection
- Transfers or payments done via telephone system
- Transfers or payments authorized via fax
- In addition no more than three transactions may be made by check, draft, debit card, or similar order and payable to a third party
Transactions that are not limited:
- In person request
- Transactions initiated via mail
- To make a payment on an in-house loan account
- Transactions via ATM
So… If you’re like us and you rely on a high yield online savings account to maximize your interest, keep an eye on those transactions. As the e-mail from ING suggested, try to group them together and make oine big transaction instead of many small transactions. Another option would be to transition to a high-yield checking account, such as an Electric Orange account, which doesn’t have such limitations.
Published on December 3rd, 2008 - 22 Comments
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I got this email recently for my october usage. I got three paychecks that month and I had it set up to automatically move some into another savings account automatically. This caused my transaction numbers to go up right there, so I changed how that transaction was done and to change some of my other patterns.
Guess we just need to know these limits, being that I have quite a few accounts with ING but try not to move around too much.
Comment by Philip — Dec 3rd 2008 @ 10:30 amI ran into this problem with my Wachovia savings account once. Several years ago we made the mistake of hooking our overdraft protection to our savings account. Just so happened that one day we made 6 debit card purchases that overdrafted and tapped into our savings account.
Comment by Online Banks Blog — Dec 3rd 2008 @ 11:36 amI also had this happen to our WAMU savings account this year - we had several connected checking accounts and had set up some automatic monthly transfers out of savings into checking for convenience. It was fine until there was a month where we had a number of one time bills to pay, so we went over the 6 withdrawal limit. It was a 33 dollar fee PER withdrawal over the limit. Luckily I caught it in time before we did more. Ended up turning off those automatic transfers, and now try to move money all at once.
I’d thought that the “6 transaction limit” was just particular to WAMU, had no idea it was a Federal regulation - thanks for posting about it…
Comment by Bryan — Dec 3rd 2008 @ 12:24 pmThis happened to me awhile back. I assumed that I would be able to transfer money in-house between all of my accounts at ING… wrong! By the time I had changed all of my automatic withdrawls to be taken from my Electric Orange account, the 3-months of doing over 6 withdrawls had already passed. It didn’t really bother me too much, as I just opened another account to take the old ones place. Hopefully it won’t be too confusing come tax time.
I assumed this was an online bank thing as I have never ran into this problem at my local bank and I transfer money between checking and savings there all the time.
Comment by Mike — Dec 3rd 2008 @ 12:35 pmYeah, I got the same thing with HSBC a year or two back. I made sure that I had my direct deposit put into my checking and then transferred things over either online or via the ATM. It’s also another reason why I’ve been looking for another checking account.
Comment by Patrick — Dec 3rd 2008 @ 12:38 pmYup, I got that email last srping. That’s why, NOW, with my personal system my twice-monthly paycheck goes into my Electric Orange account. Then EO disburses to my Savings Account (ING) and “daily spending” Checking Account (Intrust Bank) on a weekly basis, and my Fidelity IRA on a monthly basis.
Comment by jdmitch — Dec 3rd 2008 @ 1:52 pmBasically, you just need to use Electric Orange as you “clearinghouse” account and the others as deposit endpoints. You shouldn’t use a savings account as your “clearinghouse” account for making distributions. You really don’t miss out on much interest that way (aka lost interest = difference in interest rates / 52 - if your average time between EO and ING Savings is a week to disburse)
I got into a big mess because of this. The email sent by the bank didn’t reach my inbox. It went directly to my spam folder and I continued deducting money from my Savings Account. This went on until I got a written notification delivered by my postman.
Comment by KJohn — Dec 3rd 2008 @ 2:54 pmI used to have 4 automatic withdrawals set up from a savings account, then I had to make several additional withdrawals from that account and oops I went over the limit of 6. I switched all my automatic deductions over to my checking account so I wouldn’t run into that problem again.
Comment by Miss m — Dec 3rd 2008 @ 3:51 pmWe got one of those notices from our brick-and-mortar bank a couple of years ago, too. I suspect everyone runs afoul of that rule one time or another …
Comment by DW — Dec 3rd 2008 @ 6:50 pmIf you have a Money Market Account you are limited to 3 withdrawals per month. I had a Capital One Direct account a few years back and made 4 withdrawals for 3 months in a row.
All of a sudden I received a check in the mail from Capital One Direct accompanied by a statement informing me that I had violated SEC Regulations and therefore could no longer bank with them.
I was like, what . . . . ?
Comment by Neko — Dec 3rd 2008 @ 10:48 pmWith ING Direct the easy way around this is to simply close the account that is nearing it’s withdrawal limit and open another ING savings account. You can endlessly do this to avoid this problem.
Comment by Morp — Dec 4th 2008 @ 1:14 amThey don’t mind a large number of deposits however…only a problem with the number of withdrawals
Comment by gm — Dec 4th 2008 @ 10:21 amI was concerned about the 6 withdrawals from the savings account so I asked an ING Direct CSR about this. He said that you get 6 withdrawals per savings account per month. He said each sub-account also gets 6 withdrawals per month.
Comment by banana1217 — Dec 4th 2008 @ 1:46 pmI now do what jdmitch suggests and use the Electric Orange checking account as the “clearing house” and then disburse into my sub-accounts. I now have several sub-accounts that I can withdraw from and I have not come close to reaching the maximum withdrawal per month.
We hit this at our brick and mortar back a while ago. We were using our savings account to pay our mortgage and a couple other bills, and when we also transferred money back to our checking a couple times that month… we hit the 6 and they let us know right away!
This is also one of the reasons I have a “clearing house” checking account for our bills.
Good to bring up though.
Comment by Danielle — Dec 5th 2008 @ 12:51 pmGlad you posted this! I just checked and I made exactly six withdrawals from my ING account last month. They didn’t send me that same email, though.
jdmitch - I will use your suggestion of using the Electric Orange account as a “clearinghouse” from now on. Thanks for the tip.
Comment by Rebecca — Dec 5th 2008 @ 1:36 pmI am surprised to see the number of people who are tapping into their savings. Not good signs.
Withdrawals are limited to 6, in an MMA OR savings account. This is to discourage using it like a checking account and so the bank can better keep track of how much money is in these savings accounts.
6 is pretty generous, 3 of which can be a written check. These accounts are for saving, if you are making more than 6 transactions out, you are looking for a checking account. “You can’t have your cake, and eat it too”.
Comment by Paul — Dec 8th 2008 @ 9:25 amPaul,
I could be wrong, but I’m pretty sure FCN readers haven’t been “tapping into savings”. I believe most have been using a high-interest savings account as a “clearinghouse account”. Meaning, paychecks are deposited into the HISA and then the HISA puts a budgetted amount into various spending / investments accounts.
“Clearinghouse” is actually a VERY good money management strategy. However, as many have learned you need to use a HICA (checking) rather than a HISA as the “clearinghouse”. You just make sure your deposit of HICA>HISA is dated for the day of or day after your paycheck deposit.
Comment by jdmitch — Dec 8th 2008 @ 9:31 amjdmitch,
More money should be going into savings and not out. If people are over drafting, and saying they are hitting over 6 transactions out of their savings, that’s not its intended use.
My method is a direct deposit into my checking. I pay my bills from there, and every week I have an automatic transaction to deposit money INTO my savings.
Comment by Paul — Dec 8th 2008 @ 9:39 amI am with jdmitch, if I can put my money into the savings account and earn a little more interest I see no reason not to do it that way. I will pull the money out of my “spending savings” when my mortgage comes up and when my credit card bill comes up, really the only 2 payments I make out of that account.
It is just another game they allow (or force) you to play like credit card rewards.
Tell me a reason that I should not use the account this way and earn a little more out of it?
Comment by philip — Dec 8th 2008 @ 9:43 amjdmitch is correct. We’re not “tapping into our savings.” Rather, we intentionally keep our local checking account (which earns a pittance) as low as possible and hold all other money in a high yield savings account until it’s needed (we have a separate savings account for longer-term savings).
There are also instances in which people automatically transfer money from savings accounts to retirement accounts. Some mutual fund companies, including Vanguard, make a withdrawal for each mutual fund that you invest in (even if they are held within the same IRA), rather than lumping them together into one withdrawal and then splitting across funds on their end. Thus, what is functionally one withdrawal from your perspective becomes multiple withdrawals when executed.
Regarding the “intended use” of a savings account, I’m of the opinion that anything that stays within the rules falls under the intended use of one of these accounts. There’s no reason that they should only be used only for long-term savings that will remain at the bank indefinitely, which is what you seem to imply. You just have to strategize to stay under the six monthly withdrawal limit. The idea of lumping multiple withdrawals together into one large withdrawal is a good one.
I stand corrected. There is no tapping into savings going on here.
Staying within the limitations of the 6 transactions is perfectly fine. I transfer out of my savings into retirement accounts. Most of the comments were of people going over this limit.
I too hold all other money in my high yield savings and keep my checking as low as possible. But I do it checking first, then into savings, and not the other way around. That’s the method that works for me. Others say they do it the other way around, which works the same, and that’s good.
philip, INGDirect compounds monthly, other banks compound daily. It works out better for me to make deposits weekly. Your average daily balance would be the same either way compounding monthly. Your situation may be different than mine.
Nickel, great post. Helpful information for those who were unaware of this. I was surprised to know this limitation was on savings accounts. I thought it was only on MMA’s before.
Comment by Paul — Dec 8th 2008 @ 10:17 amYeah, we also go checking first, then savings, but we have things like that Vanguard auto-investment gotcha that get us close to the limit. I could always pull that directly from checking, or transfer back to checking before Vanguard pulls it, but that increases the risk of an overdraft. Anyway, this is the first time in years of doing this that we’ve eclipsed the limit, so I’m not too worried.