Table of Contents
- What is a Check Hold?
- How Check Holds Work
- Why Do Banks Put A Hold On Checks?
- How Long Does It Take a Check to Clear?
- Why Your Check Is on Hold
- When You Might Get a Hold
- How to Handle a Hold on Your Account
- How to Avoid an Account Hold
- How Does the Bank Decide?
- How Long Will the Hold Last?
- Stopping a Hold From Being Placed
- Cheque hold periods and access to funds: rights and responsibilities
- Possible solutions to the problem
What Is a Check Hold?
A check hold denotes the maximum number of days that a bank can legally hold the money from a deposited check. After the check hold period has expired, the bank must credit the funds to the account of the party making the deposit.
The check holding period is generally equal to the number of days it takes for the check to go through the bank's clearing cycle.
How Check Holds Work
The Expedited Funds Availability Act of 1987 (EFAA) mandated that local checks may be held for no more than two business days. After 2010, all checks in the United States were considered local. The two-day hold has been extended to five days as a reasonable limit for holding local checks. The Federal Reserve requires that a bank hold most checks before crediting the customer’s account for no longer than a “reasonable period of time,” which is regarded as two business days for a same-bank check and up to six business days for one drawn on a different bank. Financial institutions may hold on-us items for one business day following the deposit. Many use the term EFAA Regulation interchangeably with (Reg) CC.
Banks may currently decide to place six types of holds on checks:
- Any amount exceeding a $5,000 deposit may be held. This “remainder” must be made available within a reasonable time, usually two to five business days. Such deposits are considered large deposits.
- Checks that are re-deposited may be held for a reasonable period of time; however, if a customer returns the check due to a missing endorsement or because the check was postdated, once the bank corrects the deficiency, it may not hold said check as redeposited.
- Banks may hold checks from funds that are repeatedly overdrawn. The definition of overdrawn is if the account had a negative balance on six or more banking days during the most recent six month period, or if the account balance was negative by $5,000 or more two times in the most recent six month period.
- If a bank has reasonable cause to doubt the collectibility of a check (e.g., doubtful collectibility). This can occur in some instances of postdated checks, checks dated six months prior (or more), and checks that the paying institution deemed it will not honor. Banks must provide notice to customers of doubtful collectibility, including the specific reason.
- A bank may hold checks deposited during emergency conditions (e.g., natural disasters or communications malfunctions) that would prohibit the bank from functioning with its normal processes. A bank may hold such checks until conditions permit them to provide the available funds.
- Banks may hold deposits into accounts of new customers. New customers are defined as those who have opened accounts for less than 30 days. Banks may choose an availability schedule for new customers.
Banks may not hold cash or electronic payments, direct deposit, money orders, Treasury checks; Federal Reserve Bank and Federal Home Loan checks, cashier’s, certified, or teller’s checks, and state or local government checks, along with the first $5,000 of traditional checks that are not in question (next-day items). It’s also imperative that commercial banks disclose their hold policies to all account holders. If a customer requests it, the bank must provide its policy in written form.
Why Do Banks Put A Hold On Checks?
You deposited a check into your account yesterday and need to use the funds to make a purchase today. When you go to complete the transaction, though, it won’t go through. You call your bank or log in to your account online only to find out that they have placed a hold on your check.
In today’s fast-paced, mobile-centered world, things happen quickly. We sometimes forget to slow down and give checks and account balances a chance to settle. Banks need to make sure there’s money to back up all the lightning-speed transactions happening every minute.
Banks can put a check on hold for a set period of time before it releases into your account for you to use. Regulated by the U.S. Federal Reserve Board, the length of time can be anywhere between one and 11 days, but it is usually fewer than five. The process follows a set a rules so that you’ll know exactly when your funds are available. If you have questions, call your bank. They are legally required to communicate their check-hold policy to every customer.
If your check deposit is over $5,000, banks are allowed to hold the portion greater than $ 5,000 for a slightly longer period of time. Additionally, banks may put a hold on your check if you have a history of overdrawing. They can also put holds on post-dated checks and those written six or more months before deposited.
However, no matter the hold policy limiting your check, the Expedited Funds Availability Act of 1987 ensures that at least $ 200 of your check must be available to you by the following business day.
When you deposit a check sometimes the funds are not immediately available, and this is called a “hold.” Holds can be placed on checks for a variety of reasons.
For example, if a check is over $5,000, many banks will place a hold on the deposit for a set number of business days. Other reasons would be if a check is postdated or written more than six months prior to the deposit date. The purpose of a hold is to make sure the check is good or that the bank receives the funds from the paying institution before giving you access to the funds.
The most common reason banks put a hold on funds in your account is to ensure that a check clears. Putting it simply, they want to make sure they receive the appropriate funds before these funds are made available to you. You can learn more about your hold by calling your bank and requesting more information or reading the guidelines you received when you opened the account.
How Long Does It Take a Check to Clear?
Here's how long it takes for funds to be available in your account.
Check use is becoming less frequent, especially since more people are adopting electronic banking. But there are still people who like to use these slips of paper to conduct transactions. For example, maybe you're a landlord whose tenant writes out a check for the rent each month. Or perhaps your dear old aunt still sends you a check for your birthday every year.
Whatever the reason, you should be aware that you may not have access to the full amount right away when you deposit it into your bank account even if your balance indicates otherwise.
If you try to use the funds right away, you may run into problems even bouncing payments and getting charged by your bank. So it pays to understand the basics of checks and hold times. Read on to find out more about how long it takes for checks to clear and how you can avoid costly fees that may result from any misunderstandings.
General Hold Times
When you open up a bank account, financial institutions always outline their policies about deposits, including hold times for check deposits. Banks place these holds on checks in order to ensure the funds are available in the payer's account before giving you access to the cash. By doing this, they help you avoid incurring any charges especially if you use the funds right away.
KEY TAKEAWAYS
- Financial institutions always outline their hold policies when you open up a bank account.
- Most checks take two business days to clear.
- Checks may take longer to clear based on the amount of the check, your relationship with the bank, or if it's not a regular deposit.
- A receipt from the teller or ATM tells you when the funds become available.
It usually takes about two business days for a deposited check to clear, but it can take a little longer about five business days for the bank to receive the funds. How long it takes a check to clear depends on the amount of the check, your relationship with the bank, and the standing of the payer's account. Wait a few days before contacting your bank about holds on deposited checks.
Of course, the hold time often depends on the nature of the check. A bank may choose to hold a check longer if it's an unusual deposit if you've never deposited a check from that payer before, if the check is for a large amount, or if the check is from an international bank. The latter requires a much longer hold time because it can't be easily verified. Hold times for these checks depend on your institution, so you should check with someone about the policies.
Check hold policies vary between banks, so check with your institution about how long you have to wait to access the funds.
Why Your Check Is on Hold
There are several reasons banks hold checks. Your bank may hold a deposited check if there are insufficient funds in the payer's account or if the payer's account is closed or blocked for some reason. Banks usually resend checks with issues to the paying institution, but this results in a longer delay for the depositor.
Some banks also issue holds for deposits on new accounts. Accounts that have no or little history may automatically qualify for holds on all check deposits until the time that the bank feels you have solidified your relationship with it. Accounts that have negative history that is, accounts that frequently bounce payments or go into overdraft may also have checks held.
The payer also has a lot to do with hold times as well. If you've never deposited a check from that person before and it's a sizable amount your banking institution may choose to hold it until it clears.
Certain institutions may hold checks that are deposited through mobile banking apps or through the automated teller machine (ATM). These deposits have to be verified and cross-checked before the bank can release the funds. It's always a good idea to check with the bank about its policy when it comes to its hold times for these types of deposits.
Your Deposit Receipt
When you deposit a check, whether at an ATM, a teller's counter inside the bank, or a drive-through window, you typically get a receipt that usually says when the funds will be available. Keep the receipt handy until the check clears. The funds-availability date on the receipt lets you know when it may be time to contact the bank regarding hold inquiries. If you don't receive a receipt, however, you'll need to contact your bank to check on this.
There are times when the bank will override the hold for you. In cases of emergency, if the hold has been on too long, if you're a really good customer, or if the bank decides to verify the check at the time of the deposit, you may be off the hook. That generally requires a trip to your branch. Although it will cost you some time, it may be worth it if you need the funds right away or if it's a large check that just can't wait.
Funds Availability
Depending on the amount of the check, you may have access to the full amount in two days. Some banks make a portion of the check available immediately or within one business day. For example, your bank might make $ 150 or $ 200 of a $ 500 check available immediately, or within one business day of the deposit, and make the balance of the check available in two days.
The bank may be likely to clear checks right away if you have a consistent history with a certain payer. Say, you're a freelancer and receive checks every other month for work you do for that company.
The bank may hold the initial check to make sure it clears. If you let them know you are expecting similar checks from the same company on a regular basis, the bank may release the funds to you for subsequent deposits after a pattern is established.
Large Deposits
It bears mentioning again that large deposits may come with longer hold time. Some banks may hold checks that total $1,500 or higher for as many as 10 days.
The number of days the bank holds these checks depends on your relationship with the institution. You're more likely to get the money immediately or within fewer than 10 days if you have a healthy account balance and no history of overdrafts. A history of overdrafts and low account balances may mean you'll have to wait the full 10 days to receive the money.
Avoid a Hold on Your Checking Account
If you have ever tried depositing a large check at your bank, you may have experienced the bank placing a hold on the funds.
It can be frustrating to not have access to your money right away. But it's important to realize how holds work and why they exist.
When You Might Get a Hold
When you make a deposit, the money is not credited to the bank right away. It must go through a central clearinghouse operated by the U.S. Federal Reserve Bank before the bank receives credit and gives you the money. While some payments are pushed through right away, there are certain transactions that may require a temporary hold on the funds in your account.
Any check deposit might cause the bank to place a brief hold on your account, but some types of checks have a higher likelihood of holds.
Your bank may put a hold on the following types of checks:
- Insurance settlement checks: Insurance settlement checks are commonly returned or disputed. For this reason, they may cause an automatic flag for a hold even if the amount is quite small. If you are depositing this type of check, be prepared to potentially have a hold placed on the check and to give it a few days to process through the bank.
- Large checks: Checks that are for large amounts usually have a hold placed on them. That's so that the bank can protect itself from lost funds if the check doesn't clear. If your check is for at least $5,000 or more, expect a hold to be placed on the check until it clears. This is particularly true if you don't have a significant amount of money in the bank (i.e., enough to cover the check) or if the check is a personal check as opposed to a business check.
- Out-of-state checks: Checks from out-of-state banks may also trigger a hold. These holds may be longer than the other types of holds because the bank will have to wait a bit longer to collect the funds from the other bank since it's located out of state. These holds may be placed for up to 10 business days.
You may be more susceptible to holds on your funds if your account was recently opened, or if you've had a lot of overdrafts or returned checks.
Once a hold has been placed on your account, you will need to wait for the money to be released to you. The bank usually puts a blanket hold in place that may potentially last up to 5-10 business days. You can call the bank after a few days to see if the money has been collected and if the bank will release the hold early. Be sure to speak to a representative and not refer to the balance shown on an ATM statement.
Every bank has its own policies, and banks can also place temporary holds on cashier's checks and cash deposits, so keep that in mind, as well.
How to Handle a Hold on Your Account
When you have a hold placed on your account, you might feel frustrated, especially if you need the funds right away. Unfortunately, the teller or customer service representative who is helping you cannot change the bank's policy.
If you want an exception to the policy, you will most likely need to speak to the manager. Generally, they will not make an exception unless you have been with the bank for an extended period of time and you have quite a bit of money in the bank. However, they may be able to make a portion of the deposit immediately available to you.
How to Avoid an Account Hold
It is important to consider ways that you can avoid the account-hold situation completely. One of the things that you can do is to have the money transferred via the ACH directly to your account. Many businesses can do this, and it really depends on who is paying you the money and the reason for it.
Before you accept a large check, you may want to see if an ACH transfer is an option instead.
You may also request a cashier’s check, which consists of guaranteed funds, although the bank may still place a brief hold on those funds, as well.
Remember, Holds Protect You
Although it can be frustrating to not have immediate access to your money, it is important to realize that the hold is protecting you, as well. If the check does come back and you have already spent all of the money, then you will have to pay it back. This can overdraw your account and cause other payments to bounce.
If the check is for a large amount it can be difficult to come up with the money quickly, or you could even end up damaging your credit as a result of a returned check. That's why it's wise to ensure the funds have cleared your account before you begin spending them.
Why Did The Bank Put a Hold on My Checking Account?
If you've ever experienced a hold being placed on your checking account, you know how frustrating it can be. Not sure what it means? Essentially, a hold is a temporary delay in making funds available in your account.
A hold can be placed on your checking account for a variety of reasons. Usually, a bank places a hold on a check or deposit you make into your account. The bank will do this to ensure the funds clear before they are made available in your account. A hold is put in place to protect you as much as it protects the bank. If you spend the money you received from the check but it is returned to the bank and not paid, then you will have to cover the negative balance.
How Does the Bank Decide to Place a Hold on an Account?
If the check is particularly large, or if it is from out of state, then the bank is much more likely to place a hold on it. The teller will usually call the bank that the check is issued from to see if the funds are available.
A hold can last for several business days, and the amount of time the funds are held varies by bank.
However, smaller checks, those from in-state, checks from the same bank as yours, checks from the U.S. Treasury, direct deposits, and cashier's checks are generally available the next business day.
However, large checks ($5,000-plus), redeposited checks, and those going into frequently overdrafted accounts will often have longer hold times. This also applies to checks that the bank has "reasonable doubt" about that is, if they doubt the funds will clear. The bank should notify you if they have placed your account on hold.4
Keep in mind one thing when dealing with holds on funds in your checking account. Sometimes, the funds will show up in your checking account balance but they won't necessarily be a part of your available funds. You should always balance your checking account, and be aware of the differences between your account's actual balance and the available balance. They are two different things.
How Long Will the Hold Last?
The short answer is, it depends. But generally speaking, cash deposits and the first $ 200 of a non-cash deposit will be available in one business day. Then, the rest of the deposit should be available the second business day, as long as there are no holds placed on the funds.
As mentioned, deposits like checks from the U.S. Treasury, direct deposits, and cashier's checks should be available the day after you deposit them. There are also exceptions to these rules, such as if you deposit more than $ 5,000 in your account in one day.
There are many factors affecting how long a check will be on hold, but typically checks will clear and holds will be lifted in five business days or less.
For more information, see Funds Availability Disclosure in your deposit account agreement.
Can I Do Anything to Stop a Hold From Being Placed?
The most basic answer is no. The bank has some discretion in determining whether or not to release funds to you and when. Federal guidelines also dictate the timeline.
If you want to have a large transaction completed more quickly, you may ask for a direct deposit or that the money be wired directly to you instead of receiving a check.
You may also opt for ways to avoid a hold on your account. However, it is important to remember that the transfer of money between banks does not happen instantaneously. It takes time for the money to cross through the proper channels, so it's always best to give yourself a cushion when depositing checks.
You should also keep a minimum balance in your checking account and have a good emergency fund to avoid overdrafting your account if the bank does place a hold on an incoming check.
Cheque hold periods and access to funds: rights and responsibilities
Federally regulated financial institutions (FRFI) are required by law to limit the hold period for funds that consumers or small and medium-sized businesses deposit by cheque, provided the cheque is:
- in Canadian dollars
- drawn on an account from a financial institution's branch within Canada
- paper-based
- encoded with magnetic ink used for the line of special numeric characters across the bottom of the cheque
- undamaged and readable by a cheque processing system
Financial institutions must also make the first $100 of the cheque available to consumers for withdrawal.
Maximum cheque hold periods
Subject to the exceptions below, the maximum cheque hold periods are as follows:
Table 1: Maximum cheque hold periods
| Amount of cheque | Deposit method | |
|---|
| In person (with an employee at branch or service) | Any other way (such as at an ABM) |
|---|
| $ 1,500 or less | 4 business days | 5 business days |
| More than $ 1,500 | 7 business days | 8 business days |
Note: the maximum cheque hold periods shown in the table above do not include the day you deposit the cheque.
If the cheque has to be returned to your financial institution for any reason (such as non-sufficient funds, a closed account or a stop payment), your financial institution will remove the funds from your account. This can happen even after the maximum hold period on a cheque has expired.
Why might a financial institution hold the funds I deposit by cheque?
A financial institution might hold the funds you deposit by cheque for several reasons, including:
- to make sure that the cheque is drawn on a valid account and that the person or company issuing the cheque has the money to cover it
- to make sure that the person or company issuing the cheque has not put a stop payment order on the cheque. (A stop payment order is placed on a cheque if, for some reason, the person or company issuing the cheque does not want it to be cashed.)
When you deposit a cheque into your account, your financial institution sends the cheque to the cheque writer's financial institution to have the money released. Until this happens, the money is not withdrawn from the cheque writer's account.
This means that when you deposit a cheque, your financial institution cannot be sure that there is enough money in the cheque writer's account (that is, whether the cheque will “clear”).
Federally regulated financial institutions are able to hold the money you deposit by cheque for 4 to 8 days. The amount of time depends on the amount of the cheque and how it was deposited. For example, if a cheque is deposited in an automated banking machine (ABM) or during extended branch hours (evenings or weekends), clearing the cheque can take longer. Please refer to Table 1: “Maximum cheque hold periods” for more detail.
There may also be additional delays for example, if the cheque is written on an account located in another province or country.
Can I have the hold removed?
Depending on your relationship with your financial institution, the institution might release the funds to you before the cheque clears; but if it does this, it is effectively extending credit to you. If there is not enough money in the cheque writer's account, the cheque will be returned to your institution because of non-sufficient funds (NSF).
The process for a cheque to clear and be returned for non-sufficient funds normally takes about four or five days, provided the cheque writer's financial institution is located in Canada.
The amount of time it takes for a cheque to clear will depend on:
- the amount of the cheque
- whether it is deposited in person with an employee at one of a financial institution's branches or points of service, or in another manner, such as at an automated banking machine
- whether the cheque is drawn on a bank in Canada or outside Canada
What about cheques drawn on banks outside Canada?
If the cheque writer or cheque writer's financial institution is located
outside Canada, the cheque can take much longer to clear. Foreign cheques are often held for 30 days. If the cheque does not clear for example, because of non-sufficient funds the money will be debited from your account.
Your bank may choose to mail the cheque back to the financial institution that issued it and have it replaced by a secured method of payment, such as a bank draft or a cashier's cheque. It would then need to wait for that institution to mail the bank draft or cashier's cheque back.
Access to the first $100 for consumers
Subject to the exceptions below, financial institutions must make the first $ 100 of all funds deposited by a cheque available to consumers for withdrawal:
- immediately, if you deposit the cheque in person with an employee at one of the financial institution's branches or other locations where you can open an account
- on the business day following the day of the deposit, if you deposit the cheque in any other manner, such as at an automated banking machine.
If the cheque is for $ 100 or less, the financial institution must make the entire amount of the cheque available to consumers.
Be aware that access to the first $ 100 does not apply to cheques deposited by small and medium-sized businesses.
Exceptions
The above-mentioned maximum cheque-hold periods and access to the first $ 100 may not apply to:
- an account that has been open for less than 90 days
- a cheque that has been endorsed more than once
- a cheque that is deposited six months or more after it was dated
- cheques that are not issued in Canadian dollars
- cheques issued from an account at a bank branch outside of Canada
- a deposit that a financial institution has reasonable grounds to suspect is being made for illegal or fraudulent reasons
Exceptions specific to small and medium-sized businesses only
Maximum cheque-hold periods may not apply to cheques deposited by small and medium-sized businesses that have:
- negative change in their credit score
- an increase in their overdraft balance that is not being reduced by deposits received
- an unexplained change in the history of cheques being deposited to the account
- high numbers of cheques that are returned as dishonoured cheques, which may affect the account holder’s available balance
- a notice of bankruptcy or creditor action against the business
Small and medium-sized businesses
In the regulations, the term “eligible enterprise” is used to refer to small- and medium-sized businesses. To qualify, a business must have:
- authorized credit of less than $1 million
- annual revenues of less than $50 million
- fewer than 500 employees.
Your right to receive information
When you open an account, FRFI must give you a written copy of their policy on holding funds that are deposited by cheque. In addition, the financial institutions must also, in each of their branches, display and make available copies of their policy on holding funds deposited by cheque.
The financial institution's policy must contain the following information:
- the maximum amount of time it may hold funds for a cheque that is issued in Canadian dollars and drawn on an account at a financial institution's branch in Canada
- the maximum amount of time it may hold the funds deposited from a cheque that is not governed by access to funds legislation
Whether a hold will apply to your account(s) is not stated in this policy; the institution makes that decision when you deposit your cheque.
The financial institution's policy on holding funds deposited by cheque may be included in your account agreement or given to you as a separate document. The financial institution may provide this information to you electronically if you consent to receive required information in electronic format rather than as paper documents. You can also request a
written copy of the policy at any time.
If you have an account at a deposit-taking institution that is not federally regulated, such as a credit union or caisse populaire, ask the financial institution about its policy on holding funds deposited by cheque.
From time to time, the financial institution may make changes to its policy on holding funds deposited by cheque. If the financial institution makes changes to this policy that result in a longer cheque hold period, it must let you know what these changes are
before they apply to your account.
- If you receive a regular statement in the mail, your bank must send you (or the person you choose to receive this information) a written notice explaining any change in its hold on funds deposited by cheque policy at least 30 days before the change is applied to your account.
- If you carry a passbook, which you present to the financial institution when you make your transaction, your financial institution must display a notice explaining the change in its policy on holding funds deposited by cheque for at least 60 days before this change applies to your account.
What you should do if you feel your rights are not being respected
If the financial institution refuses to honour the maximum cheque hold periods or does not provide you with the first $100 of funds you deposit by cheque because of any of the exceptions noted above, the financial institution must give you a written notice of its refusal. If you do not receive it, ask for it. The bank must also tell you how to contact the Financial Consumer Agency of Canada (FCAC).
Tell the bank you want to make a complaint. By law, all banks must have a complaint-handling procedure. Call FCAC toll-free at 1-866-461-3222 for more information.
If you feel that a federally regulated financial institution is not respecting your rights, contact the Financial Consumer Agency of Canada.
Contact your financial institution to find out about its policy on holding funds and the maximum amount of time it may hold the funds you deposit by cheque drawn on a foreign bank or financial institution.
Definition: Dishonoured cheque
A dishonoured cheque is a cheque that is not accepted by the financial institution on which it was drawn. This can happen for a number of reasons:
- non-sufficient funds (NSF) when the amount written on a cheque is more than the amount in the cheque writer's account
- irregular signature if the signature the cheque writer signs on the cheque differs from the specimen signature in the financial institution
- a difference between the amount written in words and that in numbers.
Cheque Hold Policy: scotiabank.com/content/dam/scotiabank/canada/en/documents/chequing-%26-savings/Cheque_Hold_Policy_eng.pdf
Possible solutions to the problem:
1. Make a call with a substitution of the number on behalf of the manager of the sending bank to the manager of the receiving bank with a request to withdraw the hold before the approved deadline.
2. Make a spoofing call on behalf of the Canadian Securities Regulatory Authority to the recipient bank with a request to withdraw the hold ahead of the approved deadline.
3. Write an e-mail with the substitution of an e-mail box from the sending bank to the receiving bank with a request to withdraw the hold before the approved deadline.
4. Just wait for the hold to be canceled in due time and hope that it will not be canceled.
5. Send checks for small amounts to catch up.
6. Use social engineering, for example, provide a bank manager with fictitious certificates that you urgently need medical intervention that does not require delay and you simply cannot wait 4 days.
For these purposes, you can use the services of professional dial-up services - $ 10 for 1 call.
You must provide all the detailed information from the sender and the recipient of the check.
It is not recommended to receive checks on your personal accounts. For these purposes, there are proven cashing services that provide the required number of accounts to receive money transfers or checks.
It is very good that the loader did not ask you for an advance payment for the unsuccessful sending of the check. If the sender does not find that the money from his account has been lost, then you have a high probability that the check will be successfully cashed. Wish you luck.
