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.