Six withdrawal limit for savings accounts
I wrote about a using a firewall account with ING Direct sometime back. Using a firewall account is a concept I use to insulate my ING savings and ING checking accounts from the outside world. Any income I receive comes to my ING firewall account and then I transfer it to the appropriate ING savings account. My firewall account has a $0 balance 99% of the time or at least it did…
One of my readers made a comment about the six withdrawal limit for savings accounts about how this technique might result in me getting my savings account closed. I responded saying that ING had never said anything and that I frequently made more than six withdrawals a month using this technique. Well, that was until this week when I received the following email:
Date: May 05, 2009
Customer Number: XXXXXXXXXX
Based on recent activity in your Orange Savings Account, we want to remind you that you cannot make more than six withdrawals from your account each month. This is a federal regulation that all banks are required to follow for savings accounts like this one, so if this type of activity occurs more than three times in any 12-month period, we will have to close your account.
Since this is not the first time that you have made too many monthly withdrawals, we will be required to close your account if you do this again – and we don’t want that to happen!
So here’s what you can do to prevent your account from being closed:
# Take a look at your statements or go to ingdirect.com and review your account activity.
# Keep track of how many times you transfer money out of your Orange Savings Account, including transfers to other ING DIRECT Accounts, and make sure you’re not making more than six withdrawals each month.
# Make one or two larger transactions rather than moving money numerous times. This will reduce the number of withdrawals you make each month.
Give us a call at 1-888-464-0727 if you have any questions.
Opps! Looks like the ING withdrawal police caught me!
Why the six withdrawals limit on for savings accounts?
ING is mandated by the federal reserve to allow no more than 6 withdrawal transactions in one month per savings account. Seems they let me by for a while, but finally had to warn me.
This 6 withdrawal limitation is part of the Federal Reserve’s Regulation D requirements, commonly called “Reg D”. Reg D was enacted as part of the Securities Act of 1933 in the aftermath of the 1929 stock market crash and was part of the New Deal
Why the limit? Reg D focuses on the correct calculation of reserves. In order t properly calculate reserves, they must be classified the correct way. In order for a savings account to be a savings account, it must have less than 6 withdrawals (or transfers) within a one month period. If a customer fails to abide by this limitation on more than an occasional basis, the account can no longer be classified as savings account under Reg D.
Avoid getting your savings account closed
I would rather not have my savings account closed, so I called ING to see if they would really do it. The bottom line? They sure will. They have to. ING savings accounts are automatically closed on the third violation of the requirement. I have multiple savings accounts with ING (currently I have 7). I was assured that only the account in violation of the requirement would be closed and that the others would remain open. Still though, for my firewall account this was a problem.
I know this seems obvious, but the only real solution, at least for my firewall account is to make less transfers. So instead of transferring money right away, I’ve now added a reminder on my Google Calendar to transfer any money from that week on Friday. That way I won’t exceed the limitation, but still minimize my risk.
Another trick you can use for accounts not linked to outside accounts (like my firewall account is) is to just create a new savings account. So if you have a savings account like I do called “kids’ allowance” that you frequently transfer money out of (when I pay them), when you hit 6 withdrawals within a month’s time, just create another account and name i “kid’s allowance 2″. You can then alternate back and forth across two or more accounts and avoid the limitation. Yes it’s a bit of a pain, but it’s a solution. ING did confirm this would work, although they didn’t recommend it as a solution.
Have any of you had this problem? How did you deal with it? Add a comment!
Photo by: superstrikertwo