Consumers are smart. Some figure, if they put their money in savings, earning a dividend or interest, keep the checking account at zero, and link the checking to the savings for overdraft protection, then they have the equivalent of a checking account that pays. Smart as that is, it keeps the Fed from doing its job.
There are demand deposit accounts a.k.a. checking at banks and share drafts at credit unions, and there are savings accounts. Because the Federal Reserve conducts monetary policy, it needs to know how much money is in, and flowing out of, various types of accounts. To do that effectively, the money in those various accounts should behave predictably, at least mostly.
The Fed requires that institutions deposit with it a percentage of its demand-deposit balances. The Fed’s Regulations put an institution’s savings account in the demand-deposit category if it allows customers more than 6 unrestricted automatic withdrawals from the account in a month. The more an institution keeps on deposit at the Fed., the less it has to lend. The fed lowers or raises the reserve requirement to loosen or tighten the money supply.
If an institution lets customers make more too many automatic transfers (branch and ATM withdrawals don't count) the Fed has unclear data. Institutions that do not control it can have higher reserve -- liquidity – requirements. Institutions discourage customers from "misusing" the savings accounts by assessing a fee, usually on each transaction over a certain number (maybe 3) of qualifying transactions.
Consumers can manage their financial affairs best:
· Use separate savings and checking-type accounts as they were designed to be used.
· Maintain an accurate record (a register comes with each box of checks, or use something like Quicken) of the checking account balance; post deposits, checks, ATM withdrawals, and debit card purchases … as you make them. Your record is more up-to-date because the online balance you see may not include everything you have done.
· Keeping the checking balance on your record above zero.
o Transfer the savings funds only a few times each month.
o Write checks, take ATM withdrawals, and make debit card transactions only when your record shows there is a balance.
o Reconcile your record to your institution’s statement monthly.