BANK DEPOSITS

BY JUSTIN PRITCHARD

Updated June 11, 2018
When you deposit a check, you probably just expect the money to show up in your bank account – and you expect to be able to use that money when you need it. In most cases, that’s exactly how it works and there are no problems.
Unfortunately, sometimes there is a problem: your bank puts a hold on the money, and you’re unable to withdraw cash or spend when you need to.  Your bank’s funds availability policy, along with federal regulations, spells out exactly how long everything is supposed to take.
Funds Availability
A funds availability policy explains how long you need to wait to spend or withdraw funds after you make a deposit. Banks are required to provide this information so that you are not caught by surprise, although most people never know about 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.
Holding Deposits
When you deposit funds into your account, the bank often puts a hold on those deposits, meaning you need to wait for at least one business day before you can use the money. Especially with checks and money orders, banks cannot be sure that a payment is legitimate, plus the money doesn’t actually arrive at your bank for several business days (or more) after you make your deposit. The hold is intended to protect the bank from losing money.
These holds also protect you to some extent, but you are ultimately responsible for any deposit you make to your account. If your bank allows you to cash a check that later bounces (which can happen several weeks after you make the deposit), you’ll have to pay fees and you’ll have to repay the bank for the money they gave you – even though none of it was your fault. That’s why it pays to verify funds on suspect checks, and avoid taking payments from anybody you don’t trust.
Holding Times
Federal regulations limit how banks can set up their funds availability policies. Banks are allowed to be less strict if they want – they can make funds available immediately, and they often do so–but they cannot hold funds forever.
If there is a hold on your deposit, the bank should provide you with the release date on a receipt. In some cases, they add a hold later (and mail you a notice), so it’s a good idea to check your account balance before spending if you’re running low on funds.
Next business day: 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 (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
If the total amount of deposits by check in one day is more than $5,000, or if a check is endorsed by anybody other than the payee to whom it was issued, banks can add a hold.
Electronic deposits like wire transfers and direct deposit are also generally available within one day.
Business days include weekdays that are not holidays.
Longer Hold Times
The Expedited Funds Availability Act (Regulation CC), which sets rules on how quickly banks need to release your funds, allows longer hold times under certain circumstances. These are often called exceptions.
When an exception applies, the bank may hold funds for a “reasonable” amount of time. That time is not specifically defined, but 5 business days or so is about as long as you should have to wait.
More than $5,000: If you deposit more than $5,000 in checks–even official checks or government checks–the bank must make the first $5,000 available within one business day, but a hold can be placed on the remaining amount.
Redeposited checks: 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 those checks.
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, which makes it even more likely that you’ll go into the negative.
Reasonable doubt: If the bank suspects that the check will not be honored, they can add extra hold time. Common reasons include postdated checks and checks that are more than 60 days old.
New accounts: 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.
Note that these regulations also apply to federally insured credit unions.
Remember that business days are standard weekdays. Weekends and federal holidays that fall on weekdays will slow down clearing times.
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.” However, banks set cut-off times that might be as early as mid-afternoon where you live. For Bank of America, it’s 2 p.m.. At Chase Bank, it’s when your branch closes. When making an important deposit, ask the teller what to expect in terms of any holds (again, your receipt should tell you as well).
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: because you’re not making a deposit in-person to a bank employee, other complications can arise – especially at ATMs that don’t get an image of your check. Those strategies are best when you don’t need all of the money and your account is in good standing. Ask customer service what’s best in your situation.

BY JUSTIN PRITCHARD

Updated August 14, 2018
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 availablebalance.
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 into 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.
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. 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).


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