What Is an Excessive Transactions Fee?

An excessive transaction fee is a charge applied by a financial institution when an account holder surpasses a set number of withdrawals or transfers from a specific account type within a statement cycle. Savings and money market accounts are designed for accumulating funds, not for high-volume, daily transactional activity. The fee structure encourages customers to use checking accounts for frequent payments and transfers.

The Regulatory Basis for Transaction Limits

The foundation for limiting transactions originates from Federal Reserve Regulation D. Historically, this regulation was implemented to distinguish between different types of bank deposits. To maintain this distinction, Regulation D placed a cap of six “convenient” transfers and withdrawals per month on savings and money market accounts.

In an interim final rule issued on April 24, 2020, the Federal Reserve amended Regulation D, removing the mandatory monthly transfer limit. Despite this federal change, many financial institutions have opted to retain their own transaction limits and associated fees as part of their account agreements.

Affected Accounts and Qualifying Transactions

The accounts most commonly subject to transaction limitations are savings accounts and money market accounts. These interest-bearing accounts are intended for building savings, and the rules discourage their use for regular expenses. The fees, which can range from $3 to $15 per transaction over the limit, are disclosed by the institution at account opening.

Transactions That Count

Certain types of transactions are monitored and counted toward the monthly limit, often called “convenient” transactions because they can be done remotely. Common examples include pre-authorized or automatic transfers, such as those set up for a monthly bill or to move money to an investment account. Online transfers to another account and overdraft protection transfers that pull funds from savings also count.

Transactions That Do Not Count

Conversely, several transaction types are excluded from the monthly limit.

• Any deposits made into the account, whether electronic or in person
• Transactions conducted face-to-face with a teller at a bank branch
• Withdrawals made at an ATM
• A transfer requested by phone where a check is mailed to you

Strategies for Fee Avoidance

The primary strategy is to designate a checking account as the hub for all regular and recurring financial activities. This includes setting up all automatic bill payments, point-of-sale debit card purchases, and other frequent debits to draw from the checking account, not the savings account.

Another tactic involves planning transfers thoughtfully. Instead of making multiple small transfers from a savings account to a checking account, it is better to consolidate these into a single, larger transfer. By assessing your budget at the beginning of the month, you can move a sufficient lump sum to cover anticipated expenses. Many online banking platforms also offer tools like low-balance alerts or notifications when you are approaching your transaction limit.

It is also important to be aware of the consequences of repeatedly exceeding the transaction limits. Beyond the fees, which can erode interest earnings, a financial institution can automatically convert a savings account that consistently violates transaction limits into a non-interest-bearing checking account or close the account altogether.