Consider this scenario: You deposited a check into your account yesterday and need to use the funds to make a purchase today. When you go to complete the transaction, though, it won’t go through. You call your bank or log in to your mobile banking only to find out that your financial institution has placed a hold on your check. What?
In today’s fast-paced, mobile-centered world, so many daily activities happen quickly. We sometimes overlook what's happening in the background and need to give checks and account balances a chance to settle. Financial institutions utilize a series of automated processes to make sure there’s money to back up all the lightning-speed transactions happening every minute.
The financial processes behind your deposit
Banks or credit unions may put a check on hold for a set period of time before it releases the money into your account for your use. Regulated by the U.S. Federal Reserve Board, the length of time can be anywhere between one and 11 days, but it is usually fewer than five. The process follows a set of rules so that you’ll know exactly when your funds are available, which may not solve the challenge of the transaction you are trying to make today.
If you have never encountered this challenge before, the first place to look might be in the policies you received when you opened your account. If you don't have that paperwork handy (who does?) you should be able to find the documentation and your financial institution's policies on its website. Your bank or credit union is legally required to communicate its check-hold policy to every customer, which is why the information given to you when you open the account, either in paper form or digitally, and why it is often posted online.
When will your money be available?
Your financial institution will often have a set amount of the total deposit that will be available, as well as an amount that may be held. For example, if your check deposit is over $5,000, your bank may hold the portion of the check greater than $5,000 for a slightly longer period of time.
Additionally, banks may put a hold on your check if you have a history of overdrawing. They can also put holds on post-dated checks and those written six or more months before being deposited. It's also important to follow the endorsement policies, including your signature, and if you deposited the check through your mobile app, noting with the check's endorsement that it is "for mobile deposit."
Of course, it's a good idea to know your bank or credit union's policies, but it is also worth calling your financial institution to get clarification or even assistance in getting the funds into your account. If it is a check from a person or company you have deposited into your account many times in the past, you might be able to show there is a record of consistent payment to allow the funds to be released. This option is far more feasible if you have a good relationship with your community bank – another plus for banking locally – and have a track record of responsible banking.
However, no matter the hold policy limiting your check, the Expedited Funds Availability Act of 1987 ensures that at least $200 of your check must be available to you by the following business day. Keep in mind this depends on what time of day you deposit your check. If you upload the mobile deposit well into the evening, tomorrow will only be the first business day and the $200 may not be available until the next day.