Linking a savings account to your checking account can be an effective way to avoid an overdraft fee; however, there are some pitfalls that we all need to be aware of.
Under Federal Regulation D, we are only permitted up to 6 TOTAL monthly transfers or pre-authorized withdrawals from a savings account. If you exceed the limit you are most likely going to incur unwanted fees.
Here’s a list of transactions limited by Federal Regulation D:
• Transfers from savings account using Online, Mobile or Telephone Banking
• Automatic withdrawals from a savings account
• Overdraft transfers from savings to checking
The good news is that there are transfers from your savings account that that do not count towards Regulation D.
Here’s a list of transactions with no limits:
• ATM withdrawals and transfers from savings account
• Transfer requests from savings account made in person
• Transfer requests from savings account received by mail
Now that you know the types of transactions that are limited and not limited, it is also important to know ways to avoid Regulation D altogether.
Tips to help you manage your accounts and avoid paying a transaction fee:
• Open a checking account, if you haven’t already, and use it instead of your savings to make transfers and withdrawals
• Make recurring electronic payments from your checking account instead of your savings
• Establish a line of credit as overdraft protection—transfers are usually unlimited
• Perform transfers from your savings or money market at an ATM or in person—these do not count towards Regulation D
To learn more about Regulation D and other Federal Regulations, visit http://www.federalreserve.gov/bankinforeg/reglisting.htm.