How to Avoid Savings Withdrawal Fees?

Apr 19, 2017 | 7 Comments

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Q: I recently was charged $3 by Bank of America® for “Fee For Checks And/Or Withdrawals Over Limit.” I stash money in my savings accounts with the intention of savings, then often times run out of money before my monthly paycheck, and have to take from savings to cover bills in checking. Why should banks be allowed to penalize a customer for moving money between accounts? Why can’t the Federal Reserve let us move our money around the way we see fit, and force banks to comply with their six-a-month limit?

- Sharon

A: (To offer a little background on Sharon’s question: Bank of America® customers with a savings account are subject to a $3 fee for each withdrawal after the third per month.)

What is Excess Withdrawal Fee

For consumer banking, Regulation D places a monthly withdrawal limit of 6 per month on savings accounts.

Excess Withdrawal Fee at the Top 10 Banks

Bank Excess Withdrawal Terms
Bank of America $3 after the 3 allowed
Wells Fargo $15 after the 6 allowed
Chase $5 after the 6 allowed (max. of 3)
U.S. Bank $25 after the 6 allowed
PNC Bank $3 after the 3 allowed
Capital One $10 after the 6 allowed
TD Bank $9 after the 6 allowed
BB&T $15 after the 6 allowed
SunTrust $4 after the 2 allowed
Citibank N/A

The rule governs how much the banks must have on reserve in a particular type of account, while the rest can be lent out. For a savings account, the reserve requirement is 0% of the balance. For a checking account, which is likely to have more transaction activity, the reserve requirement is 10% of the balance.

Most banks will charge an “excess withdrawal fee” per withdrawal over the limit, while the first six withdrawals of the month are free. While this pricing model is the industry standard, some banks take different approaches.

Bank of America® begins to charge a fee after the 3rd withdrawal as a warning to savings customers. SunTrust takes a similar approach by tacking on a $4 fee after the 2nd withdrawal per month on certain savings accounts.

From a consumer perspective, such fee policy does seem ridiculous when you are just moving your money around. But, there is no rule that says that banks cannot charge a withdrawal fee. Banks could charge for every single withdrawal if they wanted to do so. In fact, some prepaid cards will charge for each bank transfer and ATM withdrawal.

Excess withdrawal fees help discourage savings customers from shifting funds frequently so that banks can maximize the 0% reserve requirement on its lending operations. It’s also part of the reason that savings accounts pay interest on deposits.

Note that the limit applies to outbound electronic, online and phone-initiated transfers.

How to Avoid Fee

If you want to avoid the excess withdrawal fee, you can withdraw money at the ATM or in person and deposit that money at another bank.

Or, since you’re finding that you frequently have to tap your savings, it would be a better idea to keep a larger balance in your checking account to act as a buffer. You would probably save more money in excess withdrawal fees than you’d earn in interest anyway.

How to Avoid Fees With Multiple Savings Accounts

One way to avoid the excess withdrawal fee is to open multiple savings accounts at the same bank. Since the federal limit applies to each individual account, having multiple accounts will allow you to have more withdrawals without reaching the limit.

Online banks such as Ally Bank and Capital One 360 are known for allowing customers to open more than one savings account. Additionally, many online banks do not charge monthly service fees on their savings accounts.

Here are the most popular online savings accounts:

Because many major banks have monthly fees (and certain requirements to waive these fees) on their savings accounts, it may not be viable to open multiple savings accounts at these banks without incurring fees.

Instead of taking the risk of racking up excess withdrawal fees in hopes that more money will stay in savings, consider a rewards checking account.

Many rewards checking accounts will pay a decent interest rate under the condition that certain requirements are met. This way, you can make as many transactions as you want while your deposits continue to earn interest.

More: MyBankTracker's Best Online Savings Accounts
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RicanBabeNY68
Wednesday, 21 Oct 2015 11:14 PM
<p>No, I have them split up, with only $100 going to sdavings every payckeck and the rest to checking, but of course, unexpected things happen and I have to transfer from savings to checking... ridiculous!</p>
SimonMBT
Monday, 13 Jul 2015 5:17 PM
<p>I think Chase is so bad (at least when compared to other banks) with its $5 excess withdrawal fee that kicks in after 6 per month. Other banks charged around $10 to $15.</p><p>Is your direct deposit going into your savings account first, causing you have to make withdrawals regularly through that account?</p>
RicanBabeNY68
Friday, 10 Jul 2015 6:17 PM
<p>I have Chase/JP Morgan and just sent them a message about this same issue. They charge me $5 for each withdrawals after the 6th one per month. There is a reason I have savings, to SAVE. You don't know what circumstances you will faced each month, so I need my money, key word, MY MONEY! I already have a credit union account and once I get back from vacation in August, I am going to switch my direct deposit and do all my banking with the CU. Screw Chase/JP Morgan and their FR BS!</p>
jeannastorm
Tuesday, 05 May 2015 8:57 AM
<p>right on, MJC60!! BOA IS A LOSER INSTITUTION FOR LOSERS!!</p>
jeannastorm
Tuesday, 05 May 2015 8:56 AM
<p>AND I could find a new bank! BOA IS A WHORE!</p>
Tuesday, 30 Sep 2014 5:01 PM
<p>Well Thank for your threatening statement ("Banks could charge for every single withdrawal if they wanted to do so. ") and thank you for your services I am going with Simple Bank anyone reading this post check Simple bank its the best !</p>
Saturday, 11 Jan 2014 10:18 PM
<p>I just closed my BoA savings account because they or the Governmnet stole my $45. BoA nickle and dimed my for the past 7 years and I have had enough. It's late Saturday, so I cannot close my Checking. But first thing Monday, I'm opening a Credit Union checking and savings and taking my $300 with me. I've had enough of big banks nickle and diming those of us who essentially pay for them to steal our money while the rich and BoA's board get rich with no negative repercussions. They can afford to keep 5K or more in a savings account and "diversify" thier portfolios. Im a civil servant trying to save for my retirement which will never come. In November, I borrowed 8K from my Deferred Comp to pay off a Maryland state tax bill and some credit card bills. I Transferred the money into my BoA savings account from my checking to ensure I spent it on what it was meant for since I use bill pay for just about everything. With no knowledge of this ridiculous federal reseve rule, I moved the money between my checking and savings when it was time to pay the different bills. I did this on 7 different occasions as the bills were paid over a 2 or 3 week period. Not only did BoA charge me $10, but last night they charged me $45 dollars and then said all the money was going to the Federal Reserve. Who knows? Maybe BoA gets a cut of all the bucks they collect from people like myself. I've had enough. They charge my college student daughter, $9 a month to have an online account becuase there's not BoA in Columbus, Oh! Its the only way to get her money without moneygram or wiring the money. They take more than they give and if the Federal Reserve is stealing from me to help banks stay afloat, this is the last bank I will use. Let them help me stay afloat!</p>