A Guide to Deposit Holds

FT Contributor  | 

To ensure they remain in good financial standing, banks need to be careful about when and how they allow customers to move money. Banks work hard to keep a close watch on money that’s deposited into customer accounts.

There are certain situations that raise red flags for banking establishments. They respond to these scenarios by freezing or putting a hold on a deposit to your checking account or savings account. This pause gives the money enough time to complete its transition and allows the bank time to ensure the transaction is valid.

Banks establish their own rules in relation to account deposits and when holds are necessary. Learning more about deposit holds, including why your deposit may be held and how you can prevent a hold, will help you better understand this action so you can keep your account in good standing.

What Is a Deposit Hold?

If your bank places a deposit hold on a deposit you make into your checking account, you won’t have access to all of your funds right away. A hold makes a portion of the funds in your deposit temporarily unavailable in your account.

Your account balance will show as if the entire deposit was made. However, your available funds will be less than the account balance when there’s a hold. This means your entire account balance isn’t available to you until the hold is lifted. It’s important to pay attention to your available balance of funds to avoid overdrafting before the hold is lifted.

Financial institutions establish their own regulations in regard to deposit holds. The bank you choose will have parameters surrounding deposits and holds, so it’s important to become familiar with these regulations.

Some banks use deposit holds sparingly and your deposit balance may be available immediately. However, some banks are more conservative about making these funds available and may hold a portion of your deposit for several days before the entire balance is available.

How Long Can Banks Hold Funds?

Your bank’s policy on deposit holds may be different than other banks’. It’s important to thoroughly review this policy so you understand how long your bank can hold a check or a portion of your deposit.

The Federal Reserve Board states that a bank can legally hold a portion of your deposit for one to five business days until making the entire balance available. The exact number of days your bank holds your funds depends on the type of deposit you attempt to make into your account.

If you make a cash deposit, your funds should be available immediately. Your funds must be made available to you within one business day if you make a deposit in person with a bank employee. This includes guaranteed deposits, such as cashier’s checks, government checks, and checks drawn from another branch of the same bank.

Your deposit may be subject to a deposit hold if it is:

  • A deposit larger than $5,000.
  • Made at an ATM or at a different bank.
  • A redeposited check that was brought back for a missing signature or another reason.
  • Being deposited to an account that’s frequently overdrawn.
  • Flagged (with reasonable cause) as a suspicious check or deposit.
  • Being deposited into a new account for a new bank customer.
  • Deposited during an emergency situation, such as a natural disaster that delays communication.

In most cases, banks are only permitted to hold a portion of your deposit for up to five business days. However, to keep your money safe in the bank, it may hold your deposit for longer if there’s suspicious behavior, the account is new, or the area is experiencing an emergency.

Why Banks Hold Deposits

Banks hold deposits to ensure the funds are available before being placed in your account. Money doesn’t move instantly so banks may wait to be sure the deposit issuer’s funds have cleared before they’re placed in their customer’s account for use. Your deposit may be held if:

  • The check is dated with a date in the future.
  • You’re suspected of writing checks with insufficient funds, referred to as “check kiting.”
  • The check is dated with a date six months in the past.
  • Your bank is informed that stop-payment has been ordered on the deposit.

A deposit hold also gives the bank time to ensure the deposit isn’t fraudulent. Your bank takes the time to guarantee the funds are available to the issuer before releasing them to your account.

How to Remove a Hold

Banks use a computer system to set up deposit holds. If there’s a hold on your deposit, you haven’t been singled out and it’s likely the computer is simply following automated procedures.

If you want the hold removed, you may be able to contact your bank and plead your case. First, ask why your deposit is on hold. Your bank must have a valid reason for the hold and should be able to provide a timeline for your available funds.

Ask your bank if it’s possible to remove the hold or to at least increase the amount of available funds while the rest of the deposit is held. In some cases, your bank may work with you but if the deposit is large, you don’t have a favorable account balance history, or the transaction is suspicious, you may need to wait for the hold to be released.

How to Prevent a Hold

To prevent a long deposit hold on your funds, consider performing an in-person deposit at your bank. Having a payment deposited directly into your account also allows you to prevent a hold on the funds. You can also avoid a hold when you use a wire transfer or deposit cash directly into your account.

As a bank customer, deposit holds can be frustrating. However, banks generally use these holds to protect their financial standing and your account balance. Be prepared for deposit holds and pay attention to your available balance to maintain a positive account history.


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