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I recently discovered this limit the hard way, after being charged a fee for each transfer over the limit. With online banking becoming so prevalent, this is a huge inconvenience as it prevents people from structuring their savings for the best internet rates. What is the reasoning behind this rule?

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You're talking about Regulation D. –  bstpierre Mar 13 '11 at 12:59
I know this is not related to your question, but most banks will refund this fee if you don't do this often. (Try talking to your bank). –  MoneyCone Mar 13 '11 at 13:15

2 Answers 2

up vote 12 down vote accepted

The regulators (in the past, at least) and banks distinguish demand-deposit (checking) accounts from savings accounts. Checking accounts are without such limits, but savings accounts are subject to withdrawals-per-month limitations. The overall effect of this is to slow the speed with which money flows through the savings account, thus essentially making the money remain on deposit for a longer time. That's exactly why generally savings accounts pay more interest than checking accounts.

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Savings accounts aren't transaction accounts, so FRB Regulation D (bstpierre linked to it above) disallow more than 6 withdrawls per month. You can deposit all that you want.

Traditionally, folks who have wanted to maximize earnings for a transaction account would get a money market account. In 2011, rates are so pitful for checking, savings and money market accounts that it is pretty much a waste of time to worry about it.

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