Are MMDAs limited to a total of six covered transactions per month or statement period?

Money Market Deposit Accounts (MMDAs) are indeed limited to a total of six covered transactions per month or statement period. This limitation is a key feature of MMDAs, which are designed to encourage savings by offering higher interest rates compared to regular savings accounts. The federal regulation that governs these accounts, specifically Regulation D, stipulates that while account holders can make an unlimited number of deposits and in-person withdrawals, the number of certain types of withdrawals and transfers, such as checks, electronic transactions, or telephonic transfers, is capped at six in a monthly or statement period.

The reasoning behind this regulation is to promote the intended use of MMDAs as savings vehicles, rather than as transactional accounts, which could lead to instability in the banking system if they were used excessively for withdrawals and transfers. The limitation encourages account holders to consider these accounts as a means for saving rather than for frequent transactions.

Understanding this regulation is crucial for compliance and ensuring that financial institutions adhere to the rules governing deposit accounts.