Federal Regulations for Money Market Accounts

A money market account is classified as a deposit account and is considered a savings account for various purposes. The difference between money market accounts and savings accounts is that you can write checks on a money market account, and are issued a debit card. Money market accounts are set up like Negotiable Order of Withdrawal accounts in that they can operate like checking accounts without becoming illegal under Regulation Q of the SEC. This allows them to earn interest like a savings account with stipulations under Regulation D.

Regulation Q

Regulation Q is a rule under the Securities and Exchange Commission that was set up as part of the New Deal in 1933. This was in response to the collapse of the financial markets. The regulations govern how interest is paid on deposits. Demand Deposit accounts are not allowed to build interest, but savings accounts are.

Regulation D

Regulation D was also set up in 1933 by the SEC. This regulation governs how depositors can withdraw their funds from the money market account. This is also the regulation that instructs banks to either close accounts that repeatedly go over the limit to the number of allowed withdrawals, or move the funds to a non-interest account.

Reserve Requirements

These regulations set up rules which require your bank to limit the amount of times you can withdraw money from a savings or money market account. Going over this limit results in a fine or account closure. In general, you cannot take out money from a money market or savings account more than six times in one month. This includes automated transfers and bill payments. There are some transactions which are not affected by this rule.

Allowed Transactions

Transactions which are not affected by either regulation are usually under specific bank guidelines. Such transactions as withdrawals or transfers made in person, or by mail are not subject to the restrictions. Deposits are also not restricted. ATM (Automated Transfer Machine) withdrawals or transfers are subject to the daily limits of the bank. Payment of a monthly loan installment to the bank where you hold the account is also not affected by these regulations.

Limited Transactions

Checks written on money market accounts, or debit card purchases are affected by the six per month rule; as are Point Of Sale (POS) transactions. Automatic transfers to another account, even if to a non-loan account within the same bank, are subject to this limit. Transactions initiated by phone, computer, fax, or through the assistance of a bank teller are subject to these regulations.