How to Protect Your Accounts from Federal Regulation D Penalties

Federal Regulation D establishes the requirement for all banks and credit unions to maintain a particular monetary reserve amount at the Federal Reserve Bank. Regulation D sets limits on non-transaction accounts to ensure that funds intended to be deposited for savings stays with the financial institution, meaning that if members are using their non-transactional accounts as transactional accounts, financial institutions are at risk for federally mandated penalties.

In general, a transaction account is one designed for frequent, unlimited transfers of money without withdrawal penalties, such as Tech CU’s Checking and Interest Checking accounts. According to Regulation D, all other accounts are non-transaction accounts, including: Savings accounts, Insured Investment accounts, Money Market Plus accounts, and Certificate accounts. These are the accounts that are affected by Regulation D.

If you access non-transaction accounts more than six times per month through a non-personal withdrawal, you may be charged penalty fees in accordance with Regulation D. Non-personal withdrawals include the following transactions: ACH transfer, automatic transfers to other accounts, Online Banking transfers, Call-24 transfers, transfers over the phone with a Tech CU representative, overdraft transfers, checks, or point of service (POS)/Check Card transactions. Remember: your Tech CU CheckCard is not a credit card; whenever you use it to make purchases that exceed the funds in your Checking account, that purchase hits your overdraft protection. If your overdraft protection is a non-transaction account (typically a Savings account), it will apply toward the Regulation D limit.

If you’ve exceeded your monthly Regulation D non-transactional allotment, any purchases that would normally be handled by your non-transactional overdraft account will be subject to non-sufficient funds penalties. That means that each transaction through a non-personal withdrawal after your six Regulation D transactions will be charged a fee of $25.

However, Regulation D does not apply to what it identifies as personal withdrawals, including: transfers or withdrawals done in person at one of Tech CU’s Financial Centers, cash withdrawals or transfers completed at an ATM, or withdrawals or transfers requested by mail.

What can you do to avoid Regulation D penalties? 

• Option #1: Keep a higher balance in your Tech CU Checking account. Tech CU’s Basic Checking and Interest Checking both offer unlimited transactions that don’t apply toward the Regulation D restrictions. In addition, there’s no limit on transferring funds into your Checking account if you make the transaction within a branch or at a Tech CU ATM.
• Option #2: Change your overdraft protection to an account that doesn’t apply toward Regulation D limits. Instead of tapping into your Share Savings or Insured Investment account, set up your overdraft protection to a Tech CU Personal Line of Credit or Home Equity Line of Credit (if applicable). Transfers from your PLOC or HELOC to your Tech CU Checking account are not subject to Regulation D, and any interest that may apply to these transfers would most likely be less than the $25 non-sufficient funds fee for exceeding Regulation D limits.
• Option #3: Set up eNotifications through Online Banking. Each time a transaction comes through your Tech CU accounts, you will receive an email notification. In addition, Online Banking tracks your Regulation D transactions and sends a special notification when you hit five transactions within a single month as a warning.

For more information about Regulation D, please feel free to contact a Tech CU representative at one of our ten Financial Centers or at our Contact Center: (408) 451-9111 or (800) 553-0880.