Why Do Banks Put Holds on Checks? (2024)

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• While most checks clear within two business days or less, banks can place longer holds on checks for a variety of reasons.
• Banks place holds on checks to make sure the payer has the bank funds necessary for the check to clear and to prevent fraud.
• You can avoid check holds by opting for electronic transfers or using cashier's checks or certified check

Introduction

It's a great feeling to deposit a check into your bank account. But what's not a great feeling is logging into your bank account a day or two after your deposit to discover that your check funds haven't yet been made available to you.

Many banks strive to clear checks by the following business day. But they also have the authority to place temporary holds on checks, which can delay the process.

While a check hold can certainly be a frustration, there's no need to panic. Below, we'll cover the most common reasons your bank may be holding your check, how long it could last, and what you can do to avoid check holds in the future.

What is a hold and why is it used?

Banks place holds on checks to make sure that the check payer has the bank funds necessary to clear it. In addition to protecting your bank, a hold can protect you from spending funds from a check that is later returned unpaid. That's important because it could help you avoid accidental overdrafts and related fees.

Reasons for check holds

Here are common reasons a bank may hold a check longer than two business days:

• New customers: Banks are more likely to place holds on check deposits from new customers with accounts less than 30 days old than from customers with whom they've developed a long and trusted relationship.
• Large deposits: Checks worth more than $5,000, or those in excess of the total current value of your account, are more likely to be held.
• Frequent overdrafts: If an account has a repeated history of overdrafts, banks may be more likely to place holds on checks to ensure they clear before releasing the funds.
• Checks previously returned unpaid: If you're trying to deposit a check that was returned unpaid once (or multiple times) before, there's a stronger chance that your bank will want to validate the check before making the funds available.

How long can a bank hold a check?

Rules pertaining to the timing of bank deposits, including checks, are outlined in a federal policy called Regulation CC.

Regulation CC guidelines

Regulation CC limits how long banks can place holds on checks under normal circ*mstances. According to these guidelines, most checks should be processed within two business days.

However, there are several "safeguard exceptions" that allow the bank to hold checks for longer periods of time, such as when checks are deposited into new accounts; checks are re-deposited; deposits are made during emergency conditions, such as war or communication interruptions; and for fraud prevention.

Banks can place longer holds on any checks they have "reasonable cause" to believe will be uncollectible. However, banks can't just use this "reasonable cause" exception whenever they like. Well-grounded facts must exist that cast doubt on a check's collectability.

Navigating check holds

Can I access a portion of my check funds during a hold?

If a hold is placed on your check due to any of the reasons listed above, you may be unable to access any of the funds until it fully clears.

If your check is being processed normally, the Federal Reserve requires that your bank make at least $200 of the check funds available to you by the next business day. The remainder of the check should be released by the second business day.

Many banks will voluntarily choose to exceed these minimum requirements for their established customers. Your bank, for example, may promise to make the full amount available to you by the next business as long as you meet its cutoff time. Some banks and credit unions even offer same-day availability up to certain dollar amounts.

What should I do if a hold is placed on my check?

After depositing any check, make sure to keep your deposit receipt. It will show when the check funds should be made available. If the funds have not been credited to your checking account by that time, you'll want to check with your bank to see if an extended hold has been placed on the check and why.

During a check hold, keep a close eye on your spending. For example, if you had $1,000 in your bank account before depositing a $1,000 check, it would normally be reasonable to assume that you have $2,000 available to spend. But if the check is being held, spending more than $1,000 from your checking account could result in an overdraft.

How to minimize delays

Can't wait two business days to access your check funds? If so, you may want to look at other deposit options. For example, funds from electronic deposits, like ACH and wire transfers, are generally made available on the same day that they are deposited.

Also, there are a few special types of checks that normally clear on the next business day. Eligible checks include cashier's checks, certified checks, teller's checks, and government checks. US Postal Service money order funds are also generally made available by the next business day.

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