Did you know that after depositing a check, under certain conditions, the bank may place a temporary hold on the funds?
Don’t get caught unprepared. What you don’t know really can hurt you.
My Story
Our youngest daughter and her husband were in the process of purchasing a piece of land. The funds for the purchase and closing costs were in an account in the state where they previously lived.
When the closing date was set, they were informed they needed to bring a certified check to the closing.
No problem. They wrote a check from their out of state bank and deposited the funds in their local bank via mobile deposit, intending to go in person to get the certified check.
That same day, they received an email that a hold had been placed on the funds for seven days. The date that the funds would become available was after the date of the closing.
Imagine their panic. The whole deal could potentially go south, simply because they were unaware that a hold on the funds was even a possibility.
While their story has a happy ending, it could have been a disaster.
Knowing that a bank can legally place a temporary hold on a deposit will enable you to plan for the possibility.
Understand the purpose of a hold.
The purpose of placing a hold on funds is for protection; both the account holder’s and the banks.
Many people don’t realize that if someone writes you a bad check, you will be the one responsible for paying back the bank.
To understand why someone else’s bad check becomes your responsibility, consider the life cycle of a bad check.
Originally, someone writes you a check.
You deposit the check and receive the cash.
The account on which the check was written does not have enough funds to cover the check.
The check is sent back to the bank where it was cashed.
The bank where it was cashed reverses the transaction and takes the funds away from the person who received the funds.
The person that received the funds takes the bad check back to the person that originally wrote the check and tries to collect.
A hold on an account allows enough time to ensure the check will clear, protecting both the account holder and the bank.
You may have access to a small amount of the deposit.
Generally, but not always, a bank must make the first $225.00 available at the beginning of the next business day following the deposit.
That is not a given.
Not all checks will be subject to a temporary hold on the funds.
There are many reasons a bank decides to place a temporary hold on an account.
Large checks are more likely to be held than smaller checks.
The larger the check, the higher the risk.
If you deposit an unusually large check, prepare to have a temporary hold placed on the funds.
Having a brand-new account puts you at risk of having the funds held.
When you first open a new bank account, you are an unknown entity.
Until you have an established track record, the bank may decide to place a hold on any deposits you make by check.
Your banking history influences the bank’s decision to put a hold on your account.
If you have a history of depositing checks that end up being bad, the bank will likely put a hold on the funds to ensure the check will clear.
The bank will hold the funds if it suspects fraud.
If something with the check seems “off”, the bank will place a hold on the funds.
This protects both you and the bank.
Check washing is an ongoing issue.
How long will the bank hold the funds?
Banking regulations state that funds can be held for a reasonable period of time.
Every bank has a funds availability schedule.
Double check availability to determine the schedule.
There are some ways to avoid having a hold placed on your account.
Direct deposits, wire transfers, and peer to peer electronic deposits assure the bank that the funds are available.
If you are able, take a check directly to the bank on which it’s written to cash it.
Did you know that after depositing a check, under certain conditions, the bank may place a temporary hold on the funds?
Now you know, and knowledge is power.
Knowing that a hold is a possibility allows you to plan ahead and avoid any disastrous consequences.
Disclaimer: This post is not intended to provide comprehensive information regarding bank holds on funds. It is intended to provide awareness that the possibility exists so that plans can be made accordingly.
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