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?
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.
Savings Withdrawal Fees at Top U.S. Banks
|Bank||Savings Withdrawal Fee||Maximum # Of Fees Charged Monthly|
|Bank of America||$10 after the first 6 withdrawals (fee waived if you maintain $20,000 in account)||6|
|Chase||$5 after the first 6 withdrawals (fee waived for Chase Premier Savings accounts with a balance of $15,000 or greater, or $25,000 or greater in Chase Business Premier Savings accounts)||6|
|Citibank||Does not charge||No maximum|
|U.S. Bank||$15 after the first 6 withdrawals||6|
|PNC Bank||$15 after the first withdrawal||No maximum|
|Capital One||$10 after the 6 allowed||No maximum|
|TD Bank||$9 after the first 6 withdrawals for Money Market/Savings accounts (fee waived for Savings Overdraft Protection transfers)
$3 after the first 3 withdrawals for Club Accounts
|BB&T||$3 after the first 3 withdrawals for Regular Savings accounts
$15 after the first 6 withdrawals for MoneyRate Savings accounts
|SunTrust||$6 after the first 6 withdrawals for Select Savings, Personal Savings, and Essential Savings accounts
$15 after the first 6 withdrawals for Signature Money Market Savings accounts
|Ally Bank||$10 after the first 6 withdrawals||No maximum|
|Union Bank||$15 after the first 6 withdrawals||No maximum|
|Wells Fargo||$15 after the first 6 withdrawals||3|
|Discover Bank||$15 after the first 6 withdrawals||No maximum|
|Regions Bank||$3 after the first 3 withdrawals||No maximum|
|Synchrony Bank||Does not charge||No charge, but if this happens on more than occasional basis, the bank reserves the right to close the account for misuse|
|Santander Bank||$5 after the first 6 withdrawals||No maximum, plus if you repeatedly exceed these limits, Santander will convert your account to a non-interest bearing checking account|
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.