Comments on: Savings Accounts and Overdraft Protection

By: miranda

miranda — Fri, 05 Sep 2008 19:48:27 +0000

Thanks Allison! It appears that there are quite a few banks that have some sort of linking between checking and savings accounts. This would be much preferred to using a line of credit.

By: Allison Blass

Allison Blass — Fri, 05 Sep 2008 19:40:44 +0000

I’m with Bank of America and I have my overdraft protection coming from my regular savings account, and not my credit card. I’m not sure why your bank says you can’t do that, but that’s how mine works. Then I think if the savings account doesn’t have enough money, I would just run into a deficit and get charged for that.

By: miranda

miranda — Fri, 05 Sep 2008 17:52:22 +0000

Thank you for the clarification, James! This is great information and very interesting. Interesting, too, how the bank uses Reg D as an excuse, even though it may not apply…

By: James@capitalcouplesfinance.com

James@capitalcouplesfinance.com — Fri, 05 Sep 2008 17:48:03 +0000

Thanks for featuring my comment today. I’m really glad you looked into this a little more to flesh it out. Unfortunately, your bank only gave you half the picture.

When I worked for a bank, I was actually involved in handling accounts that violated Reg D by exceeding the maximum number or transactions allowed per statement cycle. Reg D doesn’t apply to run-of-the-mill savings accounts. It applies to accounts that both earn interest and allow limited check writing privileges (e.g. money market accounts).

Check out this page from my bank’s website: http://www.commercebank.com/personal/saving/comparison.asp?nav=left . You can compare the features of different types of savings accounts including the number of transfers/withdrawals allowed. My bank allows 3 per month that are free, and charges $1 each for 4 and up.

As I understand it, if you have a regular savings account (the kind that earns basically no interest!) you can make unlimited transfers, but if you have a money market type account, it’s limited by Reg D.

As long as you don’t overdraw your account 6 times a month, you’d be fine connecting it to one of these Reg D covered accounts. But to be on the safe side, OD protection should probably only be set up on regular savings accounts.

Hope this helps clarify a little.