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Home >> Checks/Money Orders
Hold on Checks Explained
Why do banks put a five working day hold on checks? Is it legal? If so, how so? What law governs this?
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Untitled
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 Banks have to follow a regulation that says when funds are made available. There is a maximum time allowed, based on your account with the bank, and more importantly where the check is drawn on, compared to where your bank is when you make that deposit.
Five working days is in that schedule and would be acceptable. When the bank placed that hold, they should have told you so, and if they didn't tell you right away, they shouldn't charge you for any insufficient checks caused by that.
For bankers this is a double-edged sword. Some customers complain because a hold was placed, and some complain because they withdrew the money when the hold expired, but the check still was returned after that and the bank wanted the money back. Many checks take longer to process than the regulation allows.
Contrary to popular belief, banks don't make huge sums of money off these holds. If the bank held $1,000 for five days and earned 2.5% on that money, they'd earn a whopping $.34. This is taxable income and the bank paid an employee to review the deposit, place a hold, hand-deliver or mail a hold notice and then it has to be programmed in the computer to release at the right time. Larger items may be released in staggered amounts over a period of days. It isn't worth $.34, but banks do what they can to follow these regulations. Failure to do so can cost them in the long run in fines and penalties.
Published on BankingQuestions.com 11/25/08
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