Banking is usually straightforward. Your paycheck shows up in your account via direct deposit, you pay your bills with Bill Pay, and you withdraw your spending money from the ATM. Everything's easy and hassle-free.
Every now and then, though, you run into a rule or regulation that catches you short. While some of these regulations impact your financial life in minor ways, others are quite the opposite.
Here are 5 ways banking regulations can affect your everyday financial transactions:
1. cash Deposits over $10K Are reported to the Government
It’s not every day that you have a deposit over $10,000. If you do — maybe you made a cash sale of a car or found stacks of Benjamins under a mattress — be aware there's a branch of the U.S. Treasury that's going to hear about it. By law, financial institutions are required to file Currency Transaction Reports on currency deposits over $10,000 or multiple currency deposits that total more than $10,000 in a single day.
It all goes back to the Bank Secrecy Act, which was passed by Congress in 1970 as a way to combat money laundering. At the time government officials were specifically concerned about hefty amounts of cash flowing into the country via the drug trade.
As a law-abiding citizen, you're unlikely to be affected by this regulation; in fact, you won't have to do a thing besides lug the cash to your financial institution and fill out a deposit slip as you normally do. However, it definitely doesn’t hurt to know that your bank or credit union will be obligated to report this large transaction and that attempting to avoid having reports filed by making multiple smaller deposits, called structuring, is illegal.
2. You're limited to 6 transfers Out of a Deposit account each month
Recently, when attempting to transfer money online from my savings account to my checking account, a message popped up on my computer screen informing me that federal regulations limited savings transfers to six per month, and this transaction was my sixth.
Perplexed, I went out in search of answers. The culprit? The Federal Reserve Board’s Regulation D, or Reg. D for short. Designed to help financial institutions maintain cash reserves, Reg. D applies to several different types of transfers, but only transfers originating from savings or money market accounts, which are non-transactional. If you want to make seven transfers in a month from checking to savings, nobody is going to stop you.
Some financial institutions prevent the seventh transfer from happening altogether, which can lead to having items returned unpaid; others charge a fee to complete it. Hanscom FCU's policy is to send members notification by mail when the limit is exceeded and levying a $15 Excess Activity Fee instead of returning the item. Sometimes an account can be closed if the member consistently exceeds the limit. Will using a variety of transfer methods (phone, online, check, etc.) help? No...it's six total, not six-of-a-kind.
You can solve the problem, though, by visiting your bank or credit union in person — transactions made in person or at an ATM do not count toward your limit. You can also send in a transaction by mail and not be affected by Reg. D.
Note: each financial institution has its own Reg. D compliance program in place. Click here for information about Hanscom FCU's.
3. Frequent check bouncers are tracked in a database
If you have a history of bouncing checks or conducting insufficient funds transactions, take heed. A financial institution might reject your request to open an account with them. That’s because there are databases of repeat offenders, and banks and credit unions peek at them when would-be customers come in requesting services. Keep in mind these databases are not the same as credit bureaus. If your name shows up in one of them, you could be deemed too risky.
So how do these databases get this information? Credit unions and banks report your banking behavior to the companies that manage the databases. The practice is regulated by the Fair Credit Reporting Act and is completely legitimate.
What to do if your check-bouncing is keeping you from opening an account at your credit union of choice? Start by breaking the bad habit of bouncing checks! Once you've done that, shop around — another institution might be willing to take you on. Finally, contact the company that manages the database (ChexSystems is a common one) and ask them how to go about clearing your name.
4. Financial institutions can place a hold on your money after you deposit a check
On Friday morning you go to your credit union to deposit a $500 check from your aunt. The teller informs you that the first $200 of the check will be available to you on the next business day, which is Monday, and the remaining $300 on Tuesday. Say what? That was money you were going to use for a spa day — tomorrow morning!
Your unexpected change in plans has to do with the Expedited Funds Availability Act and the teller can’t do anything about it. The act has several provisions, all designed to benefit and protect everyone involved in the transaction: the person making the deposit, the person who wrote the check, and the financial institution.
In a nutshell, the act ensures that funds deposited via cash, wire transfer, or certain types of checks, such as bank checks, U.S. Treasury checks, and checks drawn from the same financial institution, are available to depositors by the next business day. However, other types of checks may have longer hold times, such as a check over $5,000 or one being deposited to an account that's less than 30 days old. A financial institution can choose to lessen the length of time on a hold, but when placing a hold, they cannot exceed the hold days allowed by the Act. (You can read Hanscom FCU's funds availability policy here.)
Frustrating? Maybe, especially if you expected to have access to those funds immediately. But remember — the teller is just the messenger. Next time you could ask your generous aunt to transfer the money directly to your account or show her how to transfer money using a P2P service like Popmoney, which is designed to make paying family and friends quick and easy.
5. Privately-owned ATMs are not affiliated with credit unions or banks
ATMs are all about convenience, so sometimes it makes the most sense to go to the closest one rather than drive all over in search of one owned and operated by your financial institution. If you choose to use one of these privately-owned ATMs, typically found in places like grocery and convenience stores, bars, restaurants and entertainment venues, be aware that they are not exact replicas of the ones found at credit unions and banks.
What are the differences? First of all, these ATMs dispense cash only — you cannot make a deposit at a privately-owned ATM. This might not be a huge deal, unless you suddenly need to deposit a check while hanging out at an amusement park or pizza parlor.
Secondly, privately-owned ATMs are for-profit entities. The ATM owner is making money off your need for cash, hence the astronomical transaction fees. While recent surveys found that the average bank ATM fee is around $3, private ATMs often charge much more.
And number three and maybe the biggest concern of all ... while ATMs at financial institutions are governed by federal financial laws, private ATMs are somewhat of a free-for-all. Technically, they are regulated by the state in which they reside, but not all states actually regulate them. Massachusetts is one of the states that does regulate. This means that using a private ATM is exponentially riskier than using the ATM at your credit union or bank.
There's an easy workaround, though. Did you know as a member of Hanscom FCU, you have access to over 100,000 surcharge-free ATMs, some of which can be found in the places you shop? Search for the closest one here.
Do you have questions about regulations, fees, or anything else that impacts your financial life? We here at Hanscom FCU are happy to help. Contact us and we’ll give you the information you're looking for.