Please ensure Javascript is enabled for purposes of website accessibility

Federal Reserve Eliminates Savings Account Transfer Limits

By Eric Volkman - Apr 25, 2020 at 9:50AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Fed's decision is effective immediately.

In yet another example of how the pandemic is transforming the way people conduct business, U.S. bank customers are no longer limited to the number of withdrawals and transfers they can make to and from their savings accounts. On Friday, the Federal Reserve announced it was scrapping such constraints entirely, with its decision being effective immediately.

Previously, the Fed capped the number of these transactions at six per month. This threshold was enshrined in Regulation D, a federal law. Although customers could exceed this number, they were subject to penalties -- at times onerous -- from their banks.

A customer and a teller conducting a transaction at a bank.

Image source: Getty Images.

The announcement follows the Fed's abandonment of reserve requirements for bank accounts. It was mandated that banks hold a fraction of the amounts in so-called "transaction accounts" like checking (but not savings), to guard against potential losses. 

"The regulatory limit in Regulation D was the basis for distinguishing between reservable 'transaction accounts' and non-reservable 'savings deposits'," the Fed said in a press release heralding its latest move. "The [Federal Reserve] Board's recent action reducing all reserve requirement ratios to zero has rendered this regulatory distinction unnecessary."

The big U.S. banks typically don't break out precise figures for savings accounts. However, since the largest of them have vast amounts of deposits -- Bank of America (BAC 1.38%), for instance, held almost $1.6 trillion at the end of its first quarter -- it's clear that Americans collectively have vast amounts in savings accounts alone.

This will affect the results of Bank of America and its banking peers; however, since most clients tend to use checking accounts as their main everyday funding source, this impact will likely be limited.

On Friday, Bank of America shares inched up by 1.4%, a gain that was broadly in line with the wider stock market on that day.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Bank of America Corporation Stock Quote
Bank of America Corporation
BAC
$31.56 (1.38%) $0.43

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
316%
 
S&P 500 Returns
112%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 07/02/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.