Regulation D – What you need to know

Regulation D is a federal regulation that limits the number of electronic transfers from savings accounts and money market accounts to any other share accounts. The limit per month is a maximum of six electronic transfers. An electronic transfer is any transfer that is done through online banking or Call-24 (automated phone system), any transfer requested by phone through our Call Center or any transfer that is initiated by an insufficient balance in the checking account. One other transaction that is effected by Reg D is an ACH transaction from the savings account. An example of an ACH transaction would be a merchant debiting your savings account like an insurance company or gym membership. Once the six electronic transfers have been exhausted for the current month, additional transfers must be done in person at the credit union, at a Shared Branch location or an ATM.  Find the most convenient Shared Branch location.

How to Avoid Reaching Reg D

It is standard practice for a savings or a money market account to be the number one overdraft source for a checking account. This is a great benefit until Reg D is met before the end of month. Once Reg D is reached, funds will not transfer to cover lack of funds in the checking account, which can cause transactions to be returned and/or insufficient funds fees to be charged unless there is a backup plan in place.

One way to help avoid reaching Reg D is to manage the transfers from your savings or money market accounts. This means initiating one large transfer from your number one overdraft source to your checking through Call-24 or online banking when you know you will be spending more than what is currently available within your checking account. This will ensure that you have made only one Reg D transfer rather than a Reg D transfer for each transaction clearing your checking account. A good rule to follow is transfer larger amounts less often. It would also be best if you also schedule your ACH transactions, like insurance or gym membership debits, to come out of your checking account rather than directly out of your savings account because each of these would count as one Reg D transaction. A checking account isn’t required to follow the Reg D regulations.

Another way to avoid reaching Reg D is having an Overdraft Line of Credit on your account. This small loan can be a great defense against Reg D. If your account has reached Reg D and there is a transaction presenting to your checking account that there are not sufficient funds to cover, your Overdraft Line of Credit can advance to pay the insufficient amount avoiding the $30.00 insufficient funds fee. It is true that the Overdraft Line of Credit accrues interest on balances owing, but this is pennies compared to the $30.00 fee for each transaction that takes an account negative or further negative and possibly rejects a transaction altogether. It is important to note that a savings or money market account can’t transfer to other share accounts once Reg D has been reached, but there are no restrictions on how many times these accounts can transfer to a loan. If you are interested, apply for an Overdraft Line of Credit.

Understanding how Regulation D can affect your account will help you to be proactive instead of reactive so you are not caught off-guard by negative balances and fees.