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When you can access the money you’ve deposited with your bank to pay bills, make purchases, and cover regular expenses is referred to as funds availability. Money that you deposit into your savings or checking account isn’t always immediately usable, with a few exceptions.
According to federal regulations, banks are permitted to retain deposited funds for a specific amount of time; once the hold is lifted, you are unable to access the money. But the bank can’t keep your money on hold indefinitely.
Federal law specifies guidelines for accessibility to funds and the amount of time a bank can retain deposited money. Additionally, banks have the freedom to establish their own policies regarding the availability of funds to their clients.
Here are the details you should be aware of regarding the availability of funds and how bank deposits are made.
When you deposit money into your bank account, you naturally expect to be able to access it right away. However, this isn’t always the case. Banks often place holds on deposited funds, meaning you can’t use them immediately. This can be frustrating, especially if you need the money for an unexpected expense.
In this article, we’ll delve into the concept of funds availability, exploring why banks hold your money and how long they can do so. We’ll also discuss exceptions to the standard hold times and offer tips for managing your finances while funds are on hold.
Why Do Banks Hold Your Money?
Banks hold your money for a few key reasons:
- To prevent returned payments: When you deposit a check, it takes time for the funds to be transferred from the payer’s bank to your bank. If the check bounces, your bank would be responsible for covering any payments you made with those funds. Holding the funds gives the bank time to ensure the check is good before making it available to you.
- To protect themselves from fraud: Banks may hold funds if they suspect fraudulent activity on your account. This helps protect both you and the bank from financial losses.
- To manage their own liquidity: Banks need to maintain a certain level of liquidity to meet their customers’ needs. Holding some deposits allows them to manage their cash flow more effectively.
How Long Can Banks Hold Your Money?
The length of time a bank can hold your money depends on the type of deposit and the bank’s policies. However federal regulations set maximum hold times that banks must follow.
Here’s a general breakdown of hold times for different types of deposits:
| Deposit Type | Hold Time |
|---|---|
| Cash | Same day or next business day |
| Wire transfers, ACH, and direct deposit | Up to the second business day |
| Cashier’s checks, certified checks, and teller checks | Next business day |
| U.S. Treasury checks, Postal Service money orders, checks issued by the Federal Reserve or local government agencies | Next business day |
| On-us checks (branches must be in the same state for same, next, and second business day hold rules to apply) | Same or next business day |
| Mobile check deposit | Immediately, or up to second business day |
| Regular paper checks, less than $200 | Next business day |
| Regular paper checks, more than $200 | First $200, next business day; remainder second business day |
These are just general guidelines. Your bank’s specific hold times may vary. You can find the details of your bank’s funds availability policy in your account agreement or on their website.
Exceptions to Funds Availability Hold Times
There are a few exceptions to the standard hold times. Banks may place longer holds on deposits in the following situations:
- New account deposits: If you open a new account, your bank may hold some of your initial deposits for a longer period.
- Large deposits: If you deposit more than $5,000 (excluding cash or electronic payments), your bank may hold a portion of the funds for a longer period.
- Redeposited checks: If you deposit a check that was previously returned unpaid, your bank may hold the funds for a longer period.
- Excessive overdrafts: If you have overdrawn your account six or more times in the past six months, your bank may hold your deposits for a longer period.
- Potentially uncollectable checks: If your bank suspects a check may be fraudulent or post-dated, they may hold the funds for a longer period.
Tips for Managing Funds on Hold
If you have funds on hold, there are a few things you can do to manage your finances:
- Plan ahead: If you know you’ll need to access a specific deposit, try to make the deposit a few days in advance to account for the hold time.
- Keep a buffer in your account: Having some extra money in your account can help you cover unexpected expenses while funds are on hold.
- Talk to your bank: If you have any questions about funds availability or your bank’s policies, don’t hesitate to contact them.
- Consider alternative payment methods: If you need to make a payment but your funds are on hold, you may be able to use a credit card or a money transfer service.
Understanding funds availability is important for managing your finances effectively. While it can be frustrating when your money is on hold, it’s important to remember that banks have legitimate reasons for doing so. By planning ahead and keeping a buffer in your account you can minimize the impact of funds availability holds on your daily life.
How Long Can a Bank Hold Funds?
Banks must adhere to specific rules when creating a funds availability policy. Banks are allowed by Regulation CC to retain specific kinds of deposits for a “reasonable period of time,” which typically entails:
- For on-us checks (that is, checks drawn against the same bank account), there is a maximum of two business days.
- Seven business days in total, or an extra five, for local checks
- longer hold times, provided the financial institution can demonstrate that the longer hold is warranted
Timelines for when funds become available can change depending on the kind of money being deposited. The funds availability for the various deposit types covered by the federal guidelines is broken down in this Regulation CC funds availability chart.
| Deposit Type | Deposit Method | Funds Are Available |
|---|---|---|
| Cash | In-person at a branch At an ATM or night deposit At another bank’s ATM | Same day or next business day Second business day Fifth business day |
| Wire transfers, ACH and direct deposit | Electronic deposit | Up to the second business day |
| Cashier’s checks, certified checks and teller checks | In-person at a branch At an ATM or night deposit At another bank’s ATM | Next business day Second business day Fifth business day |
| U.S. Treasury checks, Postal Service money orders, checks issued by the Federal Reserve or local government agencies | In-person at a branch At an ATM or night deposit At another bank’s ATM | Next business day Second business day Fifth business day |
| On-us checks (branches must be in the same state for same, next and second business day hold rules to apply) | In-person at a branch At an ATM or night deposit At another bank’s ATM | Same or next business day Second business day Fifth business day |
| Mobile check deposit | Mobile app scan | Immediately, or up to second business day |
| Regular paper checks, less than $200 | In-person at a branch At an ATM or night deposit At another bank’s ATM | Next business day Next business day Fifth business day |
| Regular paper checks, more than $200 | In-person at a branch At an ATM or night deposit At another bank’s ATM | First $200, next business day; remainder second business day First $200, next business day; remainder second business day Fifth business day |
In addition to the funds being available at your bank, there are other situations in which the money that has been paid to you might be withheld. Let’s take an example where you manage an online business and accept payments using a PayPal account. Funds that are credited as a pending balance may be held for up to 21 days according to PayPal’s funds availability policy. This gives PayPal ample time to make sure the order is flawless and the customer is happy before giving you the money.
eBay follows a similar policy. Payments may be withheld for a maximum of 21 days in order to confirm that transactions were successfully completed. Within a day of eBay determining that an order has been delivered, you may get access to funds that were placed on hold.
Why Do Banks Hold Funds?
Banks may retain deposited money for a number of reasons, but usually, they do so to avoid having any money taken back from your account. Stated differently, the bank will not release funds to you until it has confirmed the validity of the deposit.
The time it takes for your money to move from the payer’s bank to your bank will depend on the type of deposit you’re making. Holding onto the deposited money while you wait enables the payment to clear your account.
You could write checks, pay bills, or use your debit card to make purchases against your balance without a hold. Your bank would be responsible for making those payments if the payer’s insufficient funds resulted in the return of the check you deposited. In addition, you might be assessed overdraft or returned check fees for any transactions the bank has to pay for.
Holds on funds availability shield the bank and you from the repercussions of returned payments. If having your bank hold a check helps you avoid overdrafts and the fees that come with them, that could be advantageous.
Ask a Banker: What is a check hold?
FAQ
Can banks legally withhold your money?
What happens when the bank holds your money?
Why are banks allowed to hold your money?
How long can a bank legally hold your money?
Why does my bank put a hold on my money?
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. 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.
Should I place a hold on bank account funds?
Some other considerations for placing a hold on bank account funds may include: If you make an unusually large deposit, your bank may place a hold on bank account funds until they can verify that these funds will clear. The same applies to multiple large deposits made in a short-time period.
Can a bank hold money forever?
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.
How long can a bank hold money?
• Electronic deposits are typically available on the same day. So, one way to make sure your paycheck is available to you quickly is to sign up for direct deposit. • Cash deposits may clear immediately or the next business day. • The longest a bank can hold funds is usually five business days for money deposited at an ATM of a different bank.