Why Banks Place Holds on Your Checks

Last Updated on March 16, 2025 by admin

When you deposit a check at your bank, you may have encountered the frustrating experience of having funds placed on hold. These holds, imposed by banks for various reasons, can delay access to your money and disrupt your financial plans. Understanding why banks place holds on checks is crucial for navigating the banking system efficiently

Banks often place holds on checks deposited into checking accounts for several reasons. One primary reason is to verify the legitimacy of the check and ensure that the payer has sufficient funds in their account. This process helps protect both the bank and the customer from potential fraud and financial losses.

Additionally, banks may impose holds on checks from new customers, especially within the first 30 days of account opening, or on large deposits typically over $5,000. Accounts with frequent overdrafts or a history of returned checks may also experience holds as a risk management measure

The duration of a check hold can vary based on several factors. For most standard checks, funds are usually available by the second business day after deposit. However, the first $225 of a non-‘next-day’ check must be available by the next business day.

Larger deposits over $5,525 may have longer holds, with the portion exceeding that amount generally becoming accessible on the seventh business day. New accounts, repeatedly overdrawn accounts, or suspected fraudulent checks may also face extended holds.

These hold times are regulated by federal law to ensure reasonable availability of funds while allowing time for checks to clear

Read: How to register for FCMB Internet/online banking and Mobile App

Customers can take proactive steps to avoid having their checks held by banks. Opting for electronic payment methods like direct deposits, ACH transfers, or wire transfers can result in faster clearance compared to paper checks. Using cashier’s checks or certified checks can also lead to quicker availability of funds. Maintaining a good account history with minimal overdrafts and communicating with the bank about anticipated large deposits can help build trust and potentially reduce hold times.

Additionally, depositing checks in person at a branch during business hours, rather than through ATMs or mobile apps, can sometimes lead to faster processing

Reasons for Banks Place Hold on check

Banks place holds on checks for several reasons, primarily to protect themselves and their customers from potential fraud or insufficient funds.

Some of the most common reasons include verifying the legitimacy of the check, ensuring the check writer has sufficient funds to cover the amount, dealing with new customer accounts (less than 30 days old), handling large deposits (typically over $5,525), addressing accounts with frequent overdrafts or a history of returned checks, redepositing checks that were previously returned unpaid, and responding to emergency situations that may affect normal banking operations

Here are some common reasons:

1. Verification of Funds: Banks need to confirm that the check writer’s account has sufficient funds to cover the check amount.
2. Fraud Prevention:In a world where scams and fraud run rampant, banks need to stay vigilant. Placing holds on checks gives them time to verify the legitimacy of the funds and protect both you and themselves from falling victim to fraudulent activities.
3. New Accounts: Accounts that are less than 30 days old are more likely to have holds placed on checks to ensure the legitimacy of transactions.
4. Large Deposits: Checks with large amounts, typically over $5,000, may be held for additional verification.
5. Frequent Overdrafts: Accounts with a history of overdrafts may experience holds to prevent further issues.
6. Out-of-State Checks: Checks from out-of-state banks may require longer processing times for verification.
7. Previously Returned Checks: Checks that have been returned unpaid before are more likely to be held for validation

Understanding these reasons can help you manage your finances better and avoid potential delays.

Read: How to Contact wellsfargo Customer Service

Read: Type of Barclays bank Credit card and benefits

Regulations Governing Check Holds

The regulations governing check holds in the United States are primarily outlined in Regulation CC, which implements the Expedited Funds Availability Act (EFAA). These regulations require financial institutions to make funds deposited into transaction accounts available according to specified time schedules.

For instance, cash deposits are generally made readily available, while certain checks of $225 or less must be accessible by the next business day. Additionally, checks deposited not in person should be available no later than the second business day for specific types of checks

Consumers have rights under the Expedited Funds Availability Act, which mandates that credit unions disclose their funds availability policies and the timeframes for when deposited funds will be accessible. This includes the right to be informed about the availability of funds and the exceptions that may apply to check holds.

Consumers can enforce these rights by ensuring they receive the required disclosures when opening an account and by understanding the exceptions that may apply to check holds.

While banks and credit unions generally follow similar check hold policies based on federal regulations like Regulation CC, there can be differences in implementation. Credit unions, being member-owned institutions, may offer more flexibility and personalized service when it comes to holds.

They might be more willing to release funds earlier for members in good standing or those with longer relationships. Banks, especially larger ones, tend to have more standardized policies that are applied uniformly

Read: How to apply for barclays bank credit card

Expedited Funds Availability Act

The Expedited Funds Availability Act (EFAA) was enacted in 1987 to standardize the hold periods on deposits made to commercial banks and regulate the use of deposit holds.

This legislation requires financial institutions to disclose their hold policies to account holders, providing specific timelines for when deposited funds must be made available to customers.

The EFAA enhances transparency and predictability in banking transactions, ensuring that bank customers are informed about when they can access their deposited funds

Since its inception, the EFAA has undergone several amendments to adapt to changes in the financial industry and technology. Notable developments include the implementation of Regulation CC in 1988, which set specific availability schedules and disclosure requirements.

The Check Clearing for the 21st Century Act (Check 21) in 2003 further modified the EFAA by facilitating electronic check processing. In 2010, the Dodd-Frank Act transferred some rulemaking authority to the Consumer Financial Protection Bureau and mandated inflation adjustments to dollar amounts in the regulation

The EFAA has evolved through periodic adjustments and regulatory updates. The Consumer Financial Protection Bureau and the Federal Reserve Board announced a final rule-making for cost of living adjustments (COLAs) to the Regulation CC funds availability rules, which are required every five years.

The latest adjustments, effective July 1, 2025, include increases in various dollar thresholds related to funds availability, such as the minimum amount for holds and the large-deposit threshold

The EFAA mandates that banks make funds from certain types of deposits, like cash and government checks, available by the next business day in most cases. For other check deposits, the EFAA establishes maximum hold periods, typically 2-5 business days, after which banks must make the funds available. This law aims to standardize hold policies across banks and ensure customers have timely access to their deposited funds.