What happens to an account when the account holder exceeds the permissible number of transactions on an MMDA?

When an account holder exceeds the permissible number of transactions on a Money Market Deposit Account (MMDA), the account is converted to a transaction account. This is because MMDAs are designed to limit the number of certain types of withdrawals or transfers (usually six per statement cycle), and exceeding this limit indicates a need for a more flexible account option.

Converting the account allows the institution to comply with regulations governing MMDAs, which are meant to operate more like savings accounts than checking accounts. In this scenario, the account holder's activity suggests their financial behavior aligns more closely with that of operational funds, thus necessitating an upgrade to a transaction account, where such restrictions do not apply.

In addition, other options such as the account earning less interest, incurring fees, or being closed might occur in different contexts, but these are not the primary consequence of exceeding transaction limits for an MMDA under standard banking regulations. The conversion to a transaction account directly addresses the account's compliance with regulatory standards and aligns with the account holder's usage patterns.