How to Prevent and Remove Checking Account Holds

Learn how long a bank can hold your deposit

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When you make a deposit to your checking account, you usually won't be able to access all the money right away. Banks are able to place "holds" on deposits, preventing you from using all or part of the total amount you put in. As a result, if you're not careful, you may end up bouncing checks or having problems with automatic payments that get deducted from your account.

A hold is a temporary delay in making funds available. The bank makes it so that you cannot withdraw the money or use it for payments, even though those funds appear in your account.

Your account history shows all your transactions, and the bank adds deposits to your account balance, but the money is not part of your available balance. “Available” is the key word because you have several different account balances, including your total account balance and your funds available for immediate use.

Why Banks Place Holds on Money

Money does not move as quickly as you might think. When you deposit a check or money order into your checking account, the bank credits your account immediately, showing an increase in your total balance. However, that money still needs to move over from the paying bank. That transfer process may take several days, and your bank doesn't know for sure whether the payment will clear.

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 whether anything is wrong.

© The Balance, 2018

How Long Deposit Holds Last

Banks are allowed to be as generous as they want when making funds available. They can let you walk away with cash immediately when you make a deposit, but they almost always place a hold on deposits that can last 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 federal or state holiday in the coming week.

Federal law under the Expedited Funds Availability Act and the Check Clearing for the 21st Century Act, limits how long banks can hold your deposits. And now that banks digitally send images of checks rather than mail the original paper checks, the process has gotten quicker.

Number-of-Business-Days Rules

When you deposit cash in person to a bank employee—as opposed to through an ATM—and you have an account there, the entire amount must be made available to you within one business day. The same rule applies to electronic payments, mobile payments, and the following types of checks deposited in person with a bank employee:

  • Guaranteed: Cashier’s, certified, and teller’s checks
  • Government: These include U.S. Treasury checks, money orders issued by the U.S. Postal Service (USPS), state and local government checks that are drawn on a government located in the same state as your bank, and checks drawn on a Federal Reserve Bank or a Federal Home Loan Bank
  • On-us: Checks drawn on either the same branch or another branch of the bank where you are depositing it

The full amount of Treasury checks and on-us checks must actually be available the next business day regardless of whether they are deposited in person, through an ATM, or by mobile means. Deposits of cash and the other types of checks listed above must be made available in their entirety by the second business day if they're deposited using an ATM.

Regardless of the type of deposit, the first $200 must be made available to you for withdrawal or check writing on the next business day.

The entire amount of a local check—one deposited in a bank located in the same Federal Reserve check-processing region as the paying bank—must be made available to you for check-writing no later than the second business day after the day it is deposited. However, banks are permitted to take additional time to make the entire amount of a local check available for cash withdrawal. If your bank does that, it typically must make $400 more in cash available on the second business day after the date of deposit, and the entire amount of cash available on the third business day after the deposit date.

Deposits—cash or any kind of check or money order—made at an ATM in a bank you don't have an account at must be made available to you no later than the fifth business day after the business day on which you made the deposit.

Exceptions to the Bank Deposit Hold Rules

Banks are allowed to maintain holds for longer than those rules generally permit for the following reasons:

  • New account: One opened for 30 calendar days or less
  • Excessive deposits: More than $5,000 in checks on any one day
  • Redeposits: Checks that were returned unpaid
  • Account history: Repeated overdraws
  • Emergencies: Including loss of communications or computer facilities.

Your bank may also maintain longer holds if there's reasonable cause to believe the check being deposited is uncollectible.

Why Checks Trigger Deposit Holds

A check appears uncollectible when:

  1. The paying bank communicates that a stop-payment order was placed on the check, there are insufficient funds in the drawer's account to cover the check, or the check will be returned unpaid.
  2. It has a stale date, meaning the check was deposited six months after writing.
  3. It's postdated with a date in the future.
  4. Your bank believes you may be engaged in check kiting—purposefully writing checks with insufficient funds—or are insolvent or nearly insolvent.

How to Remove a Hold

It's frustrating when you can't spend your own money, but a bank's hold policy is generally set in stone so everyone is treated the same: A computer system follows a series of rules for all checks as opposed to singling you out. However, it may be possible to get a hold removed if you plead your case.

First, find out why the hold exists. For example, you might have deposited a Western Union money order—payment for something you sold online. That’s essentially a check deposit, subject to standard hold times. Alternatively, your funds could be frozen because you used your debit card at a business that set a substantial pre-authorization hold.

If a merchant placed a hold on your account through your debit card, you can try contacting the merchant and asking them to release the funds. Those holds should fall off after several days, but they are especially problematic with hotels, rental cars, gas pumps, and other instances where the amount of your final bill is unknown at the time your card is swiped.

If your bank places a hold on a personal check you deposited, ask if it's possible to remove the hold. Perhaps the funds arrived 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.

In many cases, you won't be able to do anything about a hold. However, 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 U.S. Consumer Financial Protection Bureau (CFPB) and file a complaint.

How to Prevent Holds

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, typically on the next business day. And you won’t need to physically get your paycheck to the bank.

For Large Deposits

Ask for a form of payment that clears quickly, including a wire transfer, which should be available the next business day. A cashier’s check, USPS money order (but not a money order issued by another entity), or certified check can provide you up to $5,000 in funds within one business day.

Deposit in Person

Deposit in person with a bank employee because deposits at ATMs or through your mobile device will take longer to clear.

Deposit to a Separate Account

Do this 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 into an account you don’t rely on for everyday use.

When Using Your Debit Card

Ask whether the merchant will place a hold 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 rental car counters, where so-called "pre-auth" holds are most common.

A Frozen Account

In some cases, banks freeze your entire account—even money that was already available in your account before making a substantial deposit. Computer programs might determine there's a risk, and your funds need to be frozen temporarily. You might be able to free up at least some of the money by calling your bank, answering some identifying questions, and stating your case.

The best way to avoid inconveniences is to talk with a banker while you’re opening an account. Describe exactly how you plan to use the account, how often you’ll deposit and withdraw, the typical sizes of transactions, and the sources of funds. A good banker will recognize account features that will make you a happier customer.

Banks use complex risk scores and computer models to prevent fraud, and you need to train the bank on what to expect in your accounts.

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 should eventually figure out that you are not doing anything wrong and may reduce the severity of holds in your account.

Your Responsibility

After a hold ends, you're free to use the money. Withdraw cash or spend using your debit card, checkbook, or any payment app linked to your checking account. However, you're still responsible for the deposit. By clearing a hold, the bank does not guarantee that a check or money order you received was good. In other words, holds protect the bank, and you spend money at your own risk.

Wait at least several weeks before you spend money from a suspect deposit—especially if anybody asks you to wire part of the funds somewhere else, which is a sign of a scam.

Common-Sense Precautions

Banks place holds on deposits because of past experience. Make a habit of checking your account balance regularly and set up alerts so you'll know if the balance falls below a certain level.

Monitor how your bank is giving you access to your funds and schedule any automated payments so they'll be certain to clear smoothly. If you plan to travel out of the country or spend money in a way that is not typical, contact the bank so they know your cards haven't been stolen. The longer your relationship goes well with a financial institution, the more leeway they're likely to give you.

Article Sources

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