Funds Availability Rules and Your Deposits
When you deposit a check, you naturally expect the money to show up in your bank account. You probably also expect to be able to use that money whenever you need it. In most cases, that’s exactly how it works, and there are no problems.
However, problems do sometimes arise. Your bank may put a hold on the money, and you can’t withdraw cash or spend it as quickly as you hoped. Your bank’s funds availability policy, along with federal regulations, spells out exactly how long everything is supposed to take.
A bank's "funds availability policy disclosure" explains how long you need to wait to spend or withdraw funds after you make a deposit. Federal law provides some limitations on holding periods, but banks set their own policies. Banks provide that information to prevent surprises, but most people don't pay attention to these policies until they’re stuck waiting for funds to clear.
The details about your bank’s policy should be part of your account agreement or included in other disclosures provided by your bank.
When you deposit funds into your account, the bank often puts a hold on those deposits, requiring you to wait for at least one business day before you can use the money.
Why Banks Hold Deposits
The money you deposit doesn’t arrive at your bank for several business days (or more) after your deposit. The hold is intended to protect the bank from losing money. If the check bounces or some other complication arises, the bank will have an opportunity to fix the problem before you have the opportunity to spend the funds.
Holds Protect You, Too
Holds can also help you avoid problems, but you are ultimately responsible for any deposit you make to your account. If your bank allows you to spend funds from a check that later bounces (which can happen several weeks after you deposit the check), you may have to pay fees in addition to repaying the bank for the money they gave you. It might not be your fault if someone writes you a bad check, but it’s still your problem if you spend money that you don't actually have. That’s why it’s critical to verify funds on suspect checks and avoid taking check payments from people you don’t trust.
Federal regulations limit how banks can set up their funds availability policies. Banks are allowed to be less strict if they want. For example, banks can make funds available immediately, and they often do so, but they cannot hold funds forever.
Whenever you make a deposit and you want to use the money soon, ask your bank when your funds will be available.
If there is a hold on your deposit, the bank should provide you with the release date on your receipt. In some cases, they add a hold later (and mail you a notice), so if you're running low on funds, it’s wise to check your account balance before spending.
Next Business Day Deposits
Most banks say that they “generally” make funds available on the business day after you make a deposit, but there are exceptions. Cash deposits made to a bank employee must be made available within one business day (business days are weekdays that are not holidays), and those deposits are often available immediately. Certain types of checks must also be available in one business day:
- Official bank checks like cashier’s checks
- Checks issued by the U.S. Treasury (such as your tax refund or Social Security)
- Checks for $200 or less
- Checks drawn on the same bank that you’re depositing to
- USPS money orders
Longer Hold Times
The Expedited Funds Availability Act (Regulation CC) sets rules on how quickly banks need to release your funds. It allows longer hold times under specific circumstances. Those situations might be called exceptions.
When an exception applies, the bank may hold funds for a “reasonable” amount of time. "Reasonable" is not specifically defined. Five business days or so is a typical hold time, but longer holds are possible.
More Than $5,000
If you deposit more than $5,000 in checks, the first $5,000 must be made available according to the bank's standard holding policy, but a longer hold can apply to the remaining amount. For example, when the checks are government checks, cashier's checks, or another low-risk item, the bank should make the first $5,000 available on the next business day, as long as the deposit meets certain criteria.
If a check is redeposited (because it bounced when it was first deposited), the bank can add a longer hold. You should also be concerned about receiving checks from someone whose check has previously bounced.
Repeatedly Overdrawn Account
Overdrawing your account (or spending more money than you have available in the account) doesn’t just cause hefty bank fees—it can also lead to holds on your deposits. This makes it even easier to go into the negative.
If the bank suspects that the check will not be honored, they can add extra hold time. Common reasons that qualify as "reasonable doubt" include postdated checks and checks that are more than 60 days old.
Brand new accounts are especially risky for banks. If your account is less than 30 days old, expect to have checks held for up to nine days. However, electronic payments and official checks should have at least partial next-day availability.
These regulations also apply to federally insured credit unions.
Watch the Cut-Off Time
It’s always important to define your terms. When you deposit a check, you probably think you did it “today,” but you may have missed the cut-off for starting the deposit process on that calendar day. When making an important deposit, ask the teller which day your deposit counts toward and whether any holds apply. Your receipt should have that information as well, but it never hurts to verify the details.
If it’s late in the day, you might be better off depositing at an ATM or through your bank’s mobile app (by snapping a photo of the check). Those methods often have later cut-off times. However, that strategy can backfire if you're unfamiliar with the technology. Complications can arise, especially at ATMs that don’t create an image of your check. Trying out new deposit methods is best when you don’t need all of the money soon and your account is in good standing. When in doubt, ask your bank's customer service department for advice about how to expedite the deposit process.