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Why Do Banks Hold Checks?

Some banking institutions provide the customer with access to some funds until the total check clears.
Checks written on out-of-state banks can take longer to clear than those from local banks.
Banks hold checks for several reasons, all based on the need to ensure that the check will be honored by the bank on which it was drawn.
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  • Originally Written By: Garry Crystal
  • Revised By: C. Wilborn
  • Edited By: Niki Foster
  • Last Modified Date: 21 November 2014
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Banks hold checks for several reasons, all based on the need to ensure that the check will be honored by the bank on which it was drawn. This wait, sometimes called the "clearing period," prevents the funds from being used by the customer right away. When a person deposits a check into his or her account, the bank must then present that check to the bank on which it was issued. While most of this is done electronically in many places, banks still hold checks to test for fraud or insufficient funds on the part of the check writer.

Checks in the US and Elsewhere

While the laws in other countries vary, few countries rely as heavily on paper checks as the United States. In Europe, for instance, most payments are made electronically, with a payer transferring funds directly into the account of the payee. This is similar to what happens when a US bank customer pays using the online bill pay service of his or her bank. In most cases, an electronic funds transfer (ETF) is not subject to the same holds that checks are.

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In the United States, banks classify checks as local or non-local. Banks hold checks drawn on local banks for a shorter period of time — in most cases, just one day. Checks that are deemed non-local, which means they come from a bank that operates outside of the local bank's check-processing region, generally take longer. It is important to note that the clearing period may be affected by holidays, weekends, or any time the bank is closed. It also is essential to understand that a check that has cleared could later be presented for insufficient funds or fraud, and the amount deducted from the depositor's account.

Bank Policies for Holding Checks

Although there are usually laws that limit the maximum amount of time banks hold checks, minimums are typically determined by each bank. Customers should ask about the policies specific to the bank, and the bank should notify them if any of those policies change. It also is important to understand a bank's guidelines on when deposits must be made. Though a bank may be open later in the afternoon, it may require that all deposits be made by 4 p.m. to be credited that day. Anything deposited later than that — whether through a teller or an ATM — will be credited the next day.

While many policies apply broadly, banks may hold checks on accounts of certain customers. Those who frequently have overdrafts, or who deposit a number of checks that are returned for nonpayment, may find their banks hold checks for a longer time than normal. A new bank account may also be subject to a longer hold since the customer hasn't had time to build up a solid banking history. A check that has been previously returned for payment and is being resubmitted to the bank may also be subject to a longer hold to confirm that the money is available. Checks over a certain amount also may be delayed for the same reasons.

Availability of Funds from Held Checks

When banks hold checks, it means those checks have not cleared their accounts, and the funds are not available for withdrawal. If the depositor is not careful, he or she can overdraw the account because the money has not yet officially been deposited. It is important for customers to understand their banks' specific policies regarding checks that are being held, and to ask about any unique circumstances in which funds may be accessible more quickly.

Checks that Are Not Held

Not all checks are subject to a clearing period. Checks written by the US Treasury — from IRS tax refunds to Social Security payments — typically clear right away. Some banks will immediately clear a check written by one of their customers and deposited into the account of another customer. Many larger company paychecks are actually electronic funds transfers and clear immediately. Some banks will also allow a customer access to a portion of the check while the rest waits to clear.

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anon971416
Post 45

I have never heard of such a sorry bank as Wells Fargo. Glad I don't bank with them and never will. Unfortunately, my daughter banks there but I am sure will soon close her account.

anon931319
Post 44

It's ridiculous to think that banks are robbing you by putting a hold on your check. If it's such a disservice, use cash, wire the funds or cash it at the drawing bank. Banking is a convenience service with insurances. Usually the complainers are the fraudsters.

anon926664
Post 43

Its called 'float'. A bank will maximize float because its a free loan for them to make money on. In most of these cases, the bank will absolutely pay you interest on your deposit date. That's about 0.00 percent to 0.05 percent on average.

With a myriad of customers, this creates a very nice free pool of money to loan out themselves and get a better return on. It is pretty funny that a 'large' check is considered $5,000 or $10,000 and they 'graciously' allow you $100-$200 of it in the meantime. Maybe $10000 was truly large in the 1910s, but not 100 years later. It's government allowable abuse, plain and simple.

anon359256
Post 42

You would think with all of the sophisticated methods that we go through every day, that a bank could just actually connect to another bank and the funds could be done in a day.

anon330472
Post 41

I work for a bank and understand your frustration. However you are wrong. While all checks clear right away, that's only provisional credit. The other banks can still deny the payment even after the money was automatically was deducted from accounts.

We verify certain things on every large check, stop payment on the the day after they come in (two days after deposit). Therefore, a three-day clearing period is reasonable. By the way, you are getting interest from the moment you make a deposit, not when checks clear. Last note: ask the teller, CSR or manager to clear the check against your savings account or a CD.

anon323383
Post 39

I deposited a check for a large amount at the Bank of America, and they told me that $200 was available to me the next day. But I did not ask them at what time the next day.

anon305059
Post 38

I deposited a US Treasury check for $600 into my Chase account and they but a hold for 10 days on it. I called the bank on Saturday. They told me to call back on Monday, because the treasury is closed over the weekend. I've been a customer with Chase for over five years.

anon296205
Post 37

Ten days? Thirty days? I deposited a check drawn on a Canadian bank (though in US funds so there is no currency conversion involved), and they are holding my money for two months. What's next, a year, indefinitely? Can they just say, "we are keeping the money, bye-bye"?

anon292615
Post 36

Clearing is not a two to five day process. I deposited a check in an ATM, only to see it clear my other account (BOA to a Credit Union) that same night.

Banks know the status of checks we deposit just that quickly. There is no reason for holds.

anon266675
Post 35

I have had the same account for more than 20 years and through four or five mergers. It is now with Chase. I recently deposited via the ATM a check drawn on another Chase account and they still put a two (2) business day hold. Since I deposited on a Saturday, it was a "hold" of more than three days! If I'd gone up to the teller, I could have cashed it. What's up with that?

My 20-plus years with this account is ending as soon as I find a customer-service-oriented bank.

anon263468
Post 34

I deposited a check at Chase, from the same company that always issues me checks as a payment and they usually clear within a day or two. Today when I deposited the check, they told me that the issuer's bank has put a 10 day delay on the checks. I wonder why in the world would they do that considering the fact that my bank and my employer's bank have been dealing for a long time?

anon241692
Post 33

I have had an account with Wachovia prior to being bought out by Wells Fargo for over 10 years and even when a hold was placed on a deposit, you could talk to a bank manager who would make a few calls if you really needed the money right away and the check would be cleared.

Now since it's Wells Fargo, I did not think that policy changed. I asked for the check to be cleared by the manager and she told me she can't do that. I told her other managers have done it at Wachovia. She said "That was Wachovia!" So I said you don't have the same policies in place now? She said no, we do it differently. I immediately lost all respect for Wells Fargo after having been a Wachovia customer for so long. I agree that it's robbery.

anon241132
Post 32

This is corporate thievery no matter how you cut it. They hold your check for 10 days, using the various ruse excuses. After it really does clear in a day or two, they get to use your funds interest free for as long as they can push it while you wait. Then, when your checks bounce, they hit your savings account to shore it up and charge you for an overdraft fee. Same thieves as 08, same MO.

anon239148
Post 31

If all this is true, it cannot be legal! Why are they allowed to do it?

anon229136
Post 30

I feel bad for everyone on this thread! On Thursday, I deposited a $2000 check from Foresters, a known insurance company. The bank called today (Saturday) to tell me that they were putting a 30 day hold on this to see if it clears. Is that even legal? I thought banking with credit unions would have some benefit, but it seems that they too are only out for themselves.

anon225849
Post 29

Wells Fargo handles checks issued to ClickBank Affiliates and here in the Philippines, BPI needs 30 days (at least) to clear the check.

anon222488
Post 28

I deposited a U.S. treasury check with wells fargo and they told us they would hold it for 12 days. can anybody help me with this before I go nuts?

anon221443
Post 27

i have a question. i posted a $4,100 check through the atm on saturday bout 5 p.m. and i know monday was a holiday but the funds aren't still available. does that seem right or should i have had the money by now?

anon217067
Post 26

I have been banking with Afena federal Credit Union for about 20 years and until now I have never had a problem. Over the years I have deposited a lot of checks for $5000 or more. Most of them were sent electronically to the bank from my employer but, I've had paper checks to issued threw the same place for more than $10,000 and not have a problem.

I deposited a check issued through ADP a reputable payroll company in February and the funds were made available immediately. I then deposit a check for $9911 in September and without warning they placed a 10 day hold on the funds. Not knowing that my funds would be placed on hold I had made arrangements to pay my bills like usual. After being told that the hold was because I had made the deposit through the ATM and it was over $5000, which is not true because I did the same thing with the $15000 check.

I waited a few days and then contacted the issuing bank to see if the check had cleared. It had cleared I waited a couple more days before contacting Afena again to see why the funds were still being held and was told that I would have to wait a week before I could have access to my money that I went to work to earn. As a result I have contacted all of my family members that I knew banked at this bank and told them what has happened to me so the same thing could not happen to them.

When my money is released, I will be closing up my account and going elsewhere.

anon207839
Post 24

Yeah, this is all crap. It sounds like the author works for a bank. it's purely profit. Banks have the ability to communicate with other banks instantly and clear or deny transactions. They have had this ability for many years.

Just imagine the amounts of interest that millions upon millions of held checks are generating for the banks on a daily basis. After 15 years in the banking industry, it is hard to look my customers in the eye and tell them that we are holding a check for a few days to "let it clear".

This is all banking industry garbage! Don't take it anymore. Do your research, find an international bank and do everything electronically. Starve the american banks out of business. You would see a huge change in their tactics after just a few days of losing customers.

anon196862
Post 23

Regardless of a couple of posts here, I think it's clear there is profit involved in banks preventing access to the funds as long as possible. Don't think in terms of just what you are depositing. Imagine the multitude of people they do this to. It amounts to some substantial interest and, of course, overdraft fees when people believe the money is available and try to use it.

I had a friend who worked at Chase and she said they always processed checks drawn on an account before deposits. This increased the chance that the account would be overdrawn and, thus, an overdraft fee could be charged. If you had more than one check posted ahead of your deposit, they charge an overdraft fee for each one. Nice profits for the bank.

anon178707
Post 22

If WalMart can figure out whether you have the money in your account in any bank, then is this rocket science for banks to do? They even hand your check back to you and run it through as an ACH transaction. Amazing. Give me a "geek" break!

Banks need to quit using people's money for indefinite periods of time! I guess they need it to pay for the large and lavish multi-million dollar buildings they seem to need!

saralee1924
Post 21

Can anyone tell me where to find statistics showing the percentage of how many checks clear within 1-15 days after being issued, 16-30 days, 31-45 days, and so on? If so, please post a response with details. Thanks!

anon169556
Post 20

Checks are held to protect the customer. Paper checks take two to five days to clear, depending on the amount. If the check does not clear, and there was no hold, then the customer is responsible for paying back the bank who gave them the money. Also, a lot of the time they are held because they are possible fraud checks. It is to protect the customer, the bank does not make any money from holding checks.

anon150188
Post 18

Large checks are held for two reasons. (1) With the money coming out of the payers bank almost immediately, but not hitting the payees account for a couple weeks, the banks get the interest on that float, which aggregated over many checks, adds up. (2) The longer the bank can hold a check, the more likely the customer is to go into overdraft, which generates fees, which go directly to the bank's bottom line.

Overdrafts can be particularly high right after big deposits, when the bank's targets are most likely to blithely write checks, forgetting to take the hold into account. You will notice they put the most onerous holds on big checks deposited near the beginning or end of a month, because statistically, that is when overdraft fees are most likely to mount.

anon147205
Post 17

I cannot believe that in an era of smartphones and megafast computers that checks cannot clear instantly. I believe that banks make a fortune on your money during the float. Just think of how many billions of dollars that Bank of America is holding in float and then calculate the interest that they can collect on that money over those two days.

anon135359
Post 16

I deposited a check into my account that was over $2000 and the next day the bank showed that it cleared. So I withdrew the money and then two days later the bank took the amount of the check back out of my account so now I am in the negative almost $2000. The check turned out to be a fraud.

No one at the bank ever told me that the money wasn't actually in there. The bank showed that it cleared and was put into my account. I even have a statement showing that it went in. I have talked to an officer and he thinks the bank should be liable. However the bank says it's my fault because I withdrew the money, but I never would have withdrawn it if the bank hadn't put it into my account.

What can I do? Should the bank be liable? They shouldn't post money from a check unless the bank the check came from clears it first, right?

anon126858
Post 15

question: I deposited a third party check into my account about three weeks ago at associated bank. The check cleared and there is still a hold on the funds. Can the bank legally do this if the funds have been deposited and cleared? Can they stop also stop you from from closing your account if there is a hold on the account?

anon122137
Post 14

I have a proposal: However long a financial institution "holds" deposited funds until they "clear" should by law be the exact amount of time they are required to provide fee-free overdraft protection.

anon118671
Post 13

Banks probably do this for profit. You cannot make me ever believe that when I deposit a cashier's check drawn off of another bank that it takes them five working days to verify those funds. That's a joke.

Banks are working the system for themselves and only themselves. Then they screw you with ridiculous credit card terms while paying you pathetic rates on your deposits while they loan out your same dollar repeatedly under ridiculous terms again. Then they pay their execs sick bonuses and ask for you to bail them out with your already much too high taxes. It is a pathetic, self-serving system.

anon114691
Post 12

I have a savings account in two different credit unions (which are practically next door to each other), and a checking account in one of them. I opened a checking account in the other on a Friday, and wrote a $1000 check, far less than I have in savings in that credit union.

Monday, the check cleared the other credit union. I checked to see if it had been released in the new account. No, it won't clear until the second Friday after it was written.

Their fine print says that with new accounts, funds won't be available for "10 business days after the check is written." Except I don't consider this to be a new account, in that I only made the funds available in another form. They have the same account number, except for the last two digits, and I view both with a single log-in.

I've informed them we're considering closing the account as soon as funds are available, if they aren't made available immediately.

anon109440
Post 11

@anon22501: I had Chase bank do the same thing to me. I deposited a check from my insurance company and it was Christmas time. I went Christmas shopping over the weekend and the next monday I find out my account is overdrawn. No one told me it would be held. I had to fight them but they eventually wiped out the fees. I then went directly to another bank and closed my Chase account. I would never bank there again!

anon107427
Post 10

How is it banks can hold checks like this, but if I pay any amount, even with a check, it can immediately be taken out? That seems a bit one-sided to me.

anon89022
Post 9

I received a payout for my 403B and the company is very large and well known. However, they still put a hold on the check stating anywhere from 2-5 days. I really don't believe it should take that long. They should have a department or person who checks the funds on a daily basis. One day, tops, is all the time it should take.

anon76080
Post 8

This occurred at a Chase Bank. A check from One West Bank (local) was placed in an account on a Friday posted by One West on Monday and not cleared until the following Tuesday. Chase had use of those funds for eight days and returned a check that should have cleared twice. No wonder they record profits.

anon61602
Post 7

why are financial aide checks held. Clearly they are from the government, so it is like saying they do not trust that the check will clear and I have had a check held for more than 10 business days.

It is hard when you need the money badly and it could keep you from being overdrawn!

anon48813
Post 6

The reason checks are held are vast and various. But first I want to say banks do not know "instantly" whether a check will clear or not. Because of check 21 turn around time is much faster but they do not have access to all banks' information. The process is the same: the check is deposited at your financial instituiton and then presented to the institution that it is drawn on. This is a 2-3 day process. I.e.: you deposit a check on Monday it is received by drawee bank on Tuesday. It can't be returned until Wednesday if funds are not available and then received by depositing bank on thursday. Because of check 21 these items can be received via an electronic file instead of paper items which speeds the process but does not tell them immediately whether a check is honored or not. Accounts that maintain a low or delinquent balance are a risk to the bank and any check deposited can present an additional loss to the bank if not paid. Large dollar checks if not paid would also be a huge risk to the financial institution if not paid as well as the depositor. It is a safeguard for both the customer and the bank to place a hold on such an item. Imagine how devasted you would be if you had to repay $5000 that you didn't have. Insurance checks are notorious for being returned, most often for stop payment. Insurance companies for whatever reason will issue checks and then decide not to pay or that the amount is incorrect, thus stopping payment on the issued check in order to reissue. They are also the most commonly forged checks. There again the depositor is responsible for covering the check if it is returned. Just remember the saying don't count your chickens before they're hatched. Well, don't count your money before the check clears.

anon48610
Post 5

I'm not sure this article discussed "why" banks hold them. Clearly, the answer is because they can, but still. They certainly know (via Check 21 legislation) that the check cleared - usually instantly, or at least the same day. The rest is profit. they just like to excuse the practice using "local", "non-local" and other crap.

anon38016
Post 4

This (rule CC) may have been great in 1988 when it was passed but needs amending. I believe that technological advances and electronic clearing now allow banks to know sooner if checks are good or not.

anon35275
Post 3

Banks in Las Vegas hold checks longer, *much* longer than stipulated, as maximum hold time, by law.

spena
Post 2

How long can a bank hold a deposit check into an account without crediting the funds?

anon22501
Post 1

why are insurance checks held?

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