When you purchase a product from a grocery store or a mall using your debit card, the merchant usually reaches out to the financial institution that issued your card to get authorization. A Hold is placed on the amount associated with the purchase until the funds are transferred to the merchant from your financial institution. The same applies to a check. When you deposit a check into your account, a hold is usually placed on your check deposit pending when it is clear. But how long will you wait?
According to the law, a bank can hold a check for a maximum of 9 business days before you can take out the money. For most cases, your check deposit will be held for a max of 3 business days.
If you are conversant with credit and debit card holds, you should understand how holds on check works. When you deposit a check, your bank won’t make the funds available to you immediately. They do this to for a few reasons. First off, banks hold checks to determine if the check is genuine or not. Secondly, banks delay a check so that in case it bounces, they wouldn’t be at a loss. In this article, I have revealed how long banks are required to hold your check by law.
Should I Take My Money Out of the Bank, and for Which Reasons?
How Long Can a Bank Hold a Check by Law?
When depositing a check into your bank account, you may have discovered that your available funds can vary from the account’s original balance. This happens because your bank or credit union has placed a hold on your check deposit.
Banks, credit unions, and other financial institutions do this to safeguard themselves. A hold is placed to ensure that the check is not returned because of insufficient funds, forgery, closed accounts, or a halted payment. It normally takes a few business days for your bank to get the funds from a deposited check.
What Is a Check Hold?
A check hold is regarded as the max number of days that a financial institution can legally hold the money from a deposited check. After the check hold period has ceased, the financial institution must credit the funds to the account of the individual initiating the deposit. The check holding period is usually equal to the number of days it takes for the check to go through the bank’s clearing cycle.
A few decades back, in 1987, to be precise, the expedited fund’s availability act was passed by the United States Congress to tackle the problem of how long financial institutions can legally hold your deposit before giving you access to your money. Financial institutions must also ensure that their hold policy is available to all their customers, and they must provide this info to new customers.
In 2003, Congress passed the check clearing for the 21st Century Act to accelerate the process and allow banks to send checks electronically. This permitted the Reserve Banks to lessen their number of paper check-processing offices from 45 in 2003 to just 1 in 2010. The result? All checks are now deemed “local” and can be processed pronto. This means less wait time for the depositor.
According to law, a bank can retain a check for a maximum of 9 business days before you can withdraw the money. For most cases, your check deposit will be retained for a maximum of 3 business days. The exact hold time depends on multiple circumstances, which we will discuss below.
How Long Can Banks Hold Checks of $5,000 and Less?
For check deposits amounting to less than $5,000 in a day, the bank must make $200 accessible to you the following business day. On the second business day, $600 must be available to you. The remaining deposit must be available by the 3rd business day.
Your bank or credit union’s check holding rules may differ, as these are the max times as stated by the law. For instance, the policy of wells Fargo, Bank of America, and Chase is to make the whole check funds accessible by the next business day.
Expedited Availability for Checks With Little Risk:
For some deposits, banks are required to make the first $5000 available in one business day. Those checks issued by the Federal Government, by the United States Treasury (like social security or tax refunds), by any state, city, county, or other municipality, checks from the same bank you are depositing into, certified checks including cashier’s checks, USPS money orders, and checks below $200 must have the first $5000 available the following business day.
Checks Hold for Newly Opened Accounts:
When depositing into a new bank account opened less than 30 days, the bank is allowed to retain checks for up to 9 days before making any funds accessible by you.
Why Banks Place Holds on Money?
Money does not move as fast as you might think. When you deposit a check or money order into your checking account, the bank credits your account fast, showing a rise in your total balance. But, that money still needs to move over from the paying bank. That transfer procedure may take several days, and your bank isn’t quite certain if the payment will clear.
Banks are concerned that checks written out to you could bounce or that those checks are not fake. A hold on the deposit allows the bank to determine if anything is wrong with the check.
Who Should You Never Name as Beneficiary?
Can a Bank Hold a Check Longer Than 10 Days?
As highlighted in the article, banks are required by law to hold a check for a maximum of 9 business days. During this period, banks try to determine if the check is real or if it’ll bounce. Since banks are required to hold your check for a max of 9 days, is it possible for a check to be held for one extra day? In other words, can a bank hold your check longer than 10 days?
Your bank can hold your check for more than 10 days. This is usually common for out-of-state checks. The reason for the long hold is because banks have to wait a bit longer to collect the funds from the other bank since it is located out of state.
If your bank holds your check for a long time ( more than expected), don’t hesitate to make a call to determine the issue.
