What are 'Holdovers'

Holdovers are transactions, usually checks, that are in transit, and are delayed during the collection process until the next cycle. In most cases, this is the following business day. Holdover checks are then bundled into cash letters and presented to either a clearinghouse or the paying bank for deposit.

BREAKING DOWN 'Holdovers'

Holdovers are typically found in large clearinghouse banks. This type of hold is different from a hold that a bank puts on out of state or third-party checks. In this case, the check is usually held over simply because it was received too late in the day for same-day processing.

How Holdovers Occur

Holdovers usually occur when a bank doesn’t have enough time to process all the payments it has received to be credited before the close of that day’s business. For example, a customer brings in a large number of checks and other transactions to be deposited into his or her account before the end of business that day. But, it’s near the end of the day and the bank simply doesn’t have enough time to process all of the transactions. Transactions that weren’t able to be processed due to this delay at the bank are holdovers.

When Holdovers Happen

When a bank has holdovers, they will provide the depositor with a deposit ticket processed on the date that they received the instruments. Holdover float may occur as a result of the delay in processing checks; when holdover float occurs, the money represented by the holdover checks briefly exists in duplicate, in both the account against which the holdover checks are drawn and the account into which they are deposited.

To avoid holdover float, some banks will post a debit to the account in which the holdover checks are to be deposited. When the holdover items are processed the next day, this debit will be zeroed out. Some banks will require customers who frequently cause holdover to sign an agreement specifying the conditions of the holdover. Other banks address the issue by refusing to allow holdovers at all, instead instructing customers that holdover items will be deposited the next business day.

Banks will typically only permit holdovers on behalf of customers with good credit ratings. When bank examiners see holdovers occurring, they typically take care to ensure that the holdovers are processed the next business day, and that holdover debits are zeroed out regularly.

RELATED TERMS
  1. Holdover Tenant

    A holdover tenant is a renter who remains in a property after ...
  2. Float

    Float is money in the banking system that is briefly counted ...
  3. ABA Transit Number

    An ABA transit number that appear on standard checks and are ...
  4. Regional Check Processing Center ...

    Regional Check Processing Center - RCPC - is a local Federal ...
  5. Availability Float

    Availability float refers to the time period between when a deposit ...
  6. Bank of First Deposit - BOFD

    The Bank of First Deposit (BOFD) is the bank where a check is ...
Related Articles
  1. Personal Finance

    What is Fractional Reserve Banking?

    Fractional reserve banking is the banking system most countries use today.
  2. Investing

    The Best Small Business Checking Accounts in 2016

    Accounts with big banks offer frills, such as mobile and text-based banking – but for small businesses, local banks and credit unions can save money.
  3. Financial Advisor

    Why Banks Don't Need Your Money to Make Loans

    Contrary to the story told in most economics textbooks, banks don't need your money to make loans, but they do want it to make those loans more profitable.
  4. IPF - Banking

    The History Of The FDIC

    Find out why this corporation was developed and how it protects depositors from bank failure.
  5. Insights

    People Are Watching Showtime's "Billions" Because They Feel Wall St Is Screwing Them

    TV dramas about Wall Street have historically tanked. That is, until Showtime's "Billions." A few financial crises can alter viewers' tastes. They now want to know how the sausage of their financial ...
  6. Personal Finance

    Banking Has Changed: What Does It Mean For Consumers?

    Banks have long been leading spenders on technological innovations. Learn the key changes in the banking industry and what institution is right for you.
  7. IPF - Banking

    Top Premium Checking Accounts of 2015

    Which banks offer the best deals for premium checking accounts – and what do you have to do to qualify for one?
RELATED FAQS
  1. How long does it take a check to clear?

    It usually takes two days for a check to clear, but in some cases it may take longer. Discover how banks treat large deposits ... Read Answer >>
  2. The Difference Between Term Deposit and Demand Deposit

    Understand the meaning of demand deposits and term deposits, and learn about the major differences between the two. Read Answer >>
  3. When do checks expire?

    There is a legal grace period for cashing checks, but depositors and issuers may risk overdraft fees if a late check is presented ... Read Answer >>
Trading Center