Why Do Banks Put Holds on Check Deposits?

Posted March 21 2016
by PenFed Team
hand signing a check

Money whirls and spins across our wired world so quickly that we can forget things sometimes need to slow down to give checks and balances a chance to happen. One somewhat frustrating process for ensuring there’s money to back up these lightning-fast transactions is the check hold.

A check hold is a set period of time the bank is allowed to hold your money before it releases the funds into your account for you to use freely. The length of time a bank can hold your money is regulated by the U.S. Federal Reserve Board. It can vary from one to 11 or more days, although it’s usually less than a handful of days.

While you might find the practice arbitrary or even downright cantankerous the first time it slows down your check deposit, the process follows a set of rules that allow you to know exactly when your funds will become available. Banks are legally required to communicate their check hold policies to their customers.

At a minimum, banks have until the next business day to fund a check you’ve deposited to your account.

The Federal Reserve Board defines a business day as any weekday, excluding federal holidays, during which the bank is making normal transactions. At PenFed, the end of a business day varies by U.S. branch, but occurs no earlier than 3:00 p.m.

Regulations require next-day funding for U.S. Treasury checks you deposit via the bank’s ATM machine, cashier’s checks you deposit via a teller, and state checks you deposit via a teller. Next-day funding also frequently applies to checks written from the same banking institution. At PenFed, you get immediate availability for direct deposits, U.S. Treasury checks payable to you, state and local government checks payable to you, cash and personal check up to $200, and non-personal checks up to $500.

Individual variations and allowances make things just a little trickier. Banks are allowed to hold your check in other circumstances, as well. If your check deposit is larger than $5,000, the bank can hold the portion over $5,000 for what’s called a “reasonable” length of time. Banks are allowed to put check holds on checks deposited into accounts with a history of being overdrawn. They’re also permitted to put holds on post-dated checks and checks that were written six months or more before you deposit them.

No matter how long the hold that applies to your check, you receive immediate access to a small part of your deposit. The Expedited Funds Availability Act of 1987 mandates that the first $200 of any check must be made available for your use by the following business day.

Check deposit hold policies and fund availability are subject to Regulation CC of the Expedited Funds Availability Act, although additional restrictions or delays may apply. For full details about fund availability at PenFed, please refer to the PenFed Membership Disclosure.