Checking Account Hold
How to Avoid and Remove Holds
When you see money in your checking account (especially after making a deposit), you might think you can spend that money right away. However, banks often place "holds" on your deposits, preventing you from using the money. As a result, you may end up bouncing checks or having problems with automatic payments that get deducted from your account.
What Is a Hold?
A hold is a temporary delay in making funds available.
The bank “freezes” funds so that you cannot withdraw the money or use it for electronic payments, but those funds do appear in your account. Your account history shows all deposits, and the money is added to your account balance, but the money is not part of your available balance.
The key word above is “available.” You have several account balances, including your total account balance, and your funds available.
If your account pays interest, you'll typically start earning interest right away—even if the funds are unavailable.
Why Banks Hold Money
Money does not move as quickly as you'd think. When you deposit a check or money order into your checking account, the bank credits your account immediately (showing an increase in your balance). However, the money has not yet been transferred from the paying bank—that process may take several days, and the bank doesn't know for sure if the payment is good.
Banks are concerned that checks written out to you could bounce, or that those checks are not legitimate. A hold on the deposit gives the bank a few more days to find out if anything is wrong.
The bank is protecting itself against losses, and those holds can help you avoid expensive mistakes as well (see below).
How Long Holds Last
In some cases, banks do not put any hold on deposits—you can spend the money immediately. However, it's common for holds to last for several business days, and the type of deposit is important.
Banks are allowed to be as generous as they want when making funds available—they can let you walk away with cash immediately—but deposits are generally held for several business days. Remember that business days are Monday through Friday, excluding holidays, so five business days means seven calendar days (or more, if there’s a holiday).
Federal law (the Expedited Funds Availability Act) limits how long banks can hold your deposits.
Cash deposits: when you deposit cash in person to a bank employee (as opposed to at an ATM), the funds must be made available within one business day.
The rest of the rules below apply to non-cash deposits.
First $200: the first $200 of your deposit must be available within one business day. The remainder should be available by the second business day (unless an "exception" applies).
“Official” deposits are generally available within one business day. When you deposit more than $5,000 of checks in one day, the first $5,000 should be available within one day, but there may be a hold on the remaining amount.
These deposits include:
- Official bank checks such as cashier’s checks or certified checks
- Money orders issued by the United States Postal Service
- Checks issued by government organizations (such as a tax refund from the U.S. Treasury)
- Checks drawn on the same institution you make your deposit at
“Exceptions” can result in longer hold times. Your bank still has to follow federal law and justify the extension, but in most cases, the hold should end within seven business days. Common exceptions include:
- Deposits of more than $5,000 per day into your account
- Depositing to a brand-new checking account or accounts with a history of insufficient funds
- Redeposited checks (that have previously bounced)
- When the bank suspects fraud or does not believe a check is legitimate
How to Remove a Hold
It's frustrating when you can't spend your own money, and banks usually set holds by policy (the computer system does the same thing for all checks, often without singling you out).
It is possible to get a hold removed, but you'll have to plead your case.
What caused it? First, find out why the hold exists. For example, you might have deposited a Western Union money order for something you sold online. That’s essentially a check deposit. Alternatively, your funds could be frozen because you used your debit card at a business that uses a large preauthorization hold.
Ask to have it cleared. If a merchant placed a hold on your account through your debit card, contact the merchant and ask them to release the funds. These holds should fall off after a few days, but they are especially problematic with hotels, rental cars, and gas pumps (or other situations where your final bill is unknown). If your bank placed a hold on a personal check you deposited, ask if it's possible to remove the hold—perhaps the funds have come in from the paying bank and there is no more risk to the bank. Your bank might be willing to speed things up, especially if you don't have a history of bouncing checks or making bad deposits.
Wait it out. In some cases, you won't be able to do anything about a hold. Again, your bank needs to follow federal regulations and justify any holds in your account, so they can't keep you from your money forever. If things go on for too long, contact the US Consumer Financial Protection Bureau (CFPB) and file a complaint.
To avoid holds in your account, make deposits that are likely to become available as soon as possible.
For your paycheck, sign up for direct deposit. Electronic transfers (especially those that occur regularly, like a payroll deposit) tend to clear quickly. You might even have access to your money a day or two earlier than you would have received your paycheck.
For large deposits, ask for a form of payment that clears quickly:
- Wire transfers are often available within one day.
- Cashier’s checks, USPS money orders (but not other money orders), and certified checks can provide up to $5,000 within one business day.
Deposit to a separate account if you’re making a deposit that is likely to cause problems. For example, if you have multiple checking accounts and you need to deposit a large out-of-state or foreign check, make the deposit in an account that you don’t rely on for everyday use.
When using your debit card, ask if a hold will be placed on your account, and find out how much it will be. If the amount is large enough to cause problems, use a credit card instead or transfer extra money into your checking account to cover the hold. Be careful about swiping your debit card at gas pumps, hotels, and restaurants, where these "pre-auth" holds are most common.
The Whole Account Is Frozen?
In some cases, banks freeze your entire account—even money that was already available in your account before making a big deposit. Sometimes a computer program decides (for a reason that won't be explained to you) that there's a risk and funds need to be frozen temporarily. Again, a phone call might be able to free up at least some of the money.
The money you can spend in your account is often called your available balance. Unavailable funds might be listed under your hold balance.
What’s the best way to avoid this hassle? Talk with a banker while you’re opening an account and making large deposits. Tell them exactly how you plan to use the account: how often you’ll deposit and withdraw, the typical size of transactions, and the source of funds. A good banker will recognize account features that will make you a happy customer.
Over time, your bank (and its computer systems) should get accustomed to how you use your account. If you frequently travel or make deposits and withdrawals, the bank will eventually figure out that you are not doing anything wrong and reduce the holds in your account. Banks use complex risk scores and computer models to prevent fraud, and you’ll need to train the bank on what to expect in your accounts.
You're Responsible for the Money
Once a hold is released, you're free to use the money: withdraw cash or spend it using your debit card, checkbook, or payment app linked to your checking account. However, you're still responsible for the deposit—the bank makes no guarantee that a check or money order you received was good. In other words, holds protect the bank, and you're spending at your own risk.
Sometimes it takes several weeks to find out that a check will bounce. If you've spent the money from a deposit, you'll have a negative account balance, and you'll have to replace those funds. Sometimes that’s hard to do, especially if you sent cash to somebody you don’t know (as happens in the classic cashier's checks scam).
If you have any doubts about a deposit, proceed with caution. Try to verify funds with the check writer’s bank (or with a money order issuer) before you make a deposit—this can help you avoid fees for depositing bad checks at your bank. Wait at least several weeks before you spend the money (especially if anybody asks you to send the funds somewhere else, which is a clear sign of a scam).