Beware of This Costly Savings Account Rule This Holiday Season

The holidays are almost here, and that means it's about time to crack open the savings account that you've (hopefully) been adding to all year long. You've probably got a lot you need to buy before we ring in 2024, and I'm guessing you don't want to spend more than you have to.

You likely know about savings techniques like comparison shopping and using coupons. But sometimes saving money is as simple as avoiding costly errors. Here's one mistake that could cost you big time.

The ghost of Regulation D still lingers

Prior to the pandemic, there was a federal rule known as Regulation D that dealt with savings account withdrawals. Essentially, it limited you to six "convenient" savings account withdrawals per month. Convenient withdrawals were things like moving money out of your account electronically, debit card transactions, check withdrawals, or wire transfers.

If you exceeded your six convenient withdrawals per month, you either had to pay a fee for each additional monthly withdrawal you made or limit yourself to "inconvenient" withdrawals, like visiting a bank branch or an ATM. Fees varied by bank, but they could be as much as $15 per transaction. A handful of those could easily lead to racking up a few hundred dollars in fees.

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But then COVID-19 happened and the Federal Reserve, America's central bank, decided it wasn't nice to restrict people's access to their savings when they didn't have jobs. So it suspended Regulation D on April 28, 2020 and so far, it hasn't reinstated it.

You might assume that all these excessive withdrawal fees just went away after that, but that's not true. Some banks have remained decidedly old-fashioned and kept the excessive withdrawal fees for those who make more than six monthly savings account withdrawals. Other banks now allow more monthly withdrawals, but still happily charge customers who exceed their limits. So like it or not, you need to play by your bank's rules if you want to avoid extra fees this holiday season.

How to avoid excessive transaction fees

Avoiding excessive transaction fees isn't too difficult once you understand your bank's limitations. The first step is to figure out how many monthly withdrawals you're allowed and which types of transactions count toward your monthly limit. You should be able to find this in the fee schedule for your savings account. But if you can't or you don't want to read through all the fine print, you can always just contact your bank and ask.

Do your best to stay below your bank's monthly transaction limit. If you anticipate a lot of spending, make larger, less frequent withdrawals in order to keep yourself to just a few each month. If it turns out you don't need all the money you took out of your savings account, you can always put the extra back later. There is no limit to the number of deposits you can make to your savings account each month.

If you do inadvertently exceed your bank's transaction limit, see if you can delay future purchases until the next month. Or limit yourself to types of transactions your bank doesn't penalize. For example, if transfers initiated by a bank teller at a branch don't count toward your monthly limit, you may have to head down to your neighborhood bank instead of moving your money yourself online. It's a pain, but it's better than paying boatloads in fees to access your own money.

We can hope that one day banks will get rid of these fees for good, but that doesn't seem likely anytime soon. So for now, it's just something to be aware of. And if you decide to shop for a new savings account in the future, add this to your list of factors to consider when deciding which is right for you.