I have a second party check made out for $1000. The bank said they needed to hold it. What happens when they hold it? Do they verify the account with the account holder, or do they call the person who wrote it to verify the amount? I'm really confused as to why they just can't cash it.
The hold period is to allow the check to go through the clearing process. Many banks are just too busy to call customers and verify information. They also may not even have the contact information to do that.
In the event that check didn't pay for any reason, the bank doesn't want to be in a position of having to ask you for the money back, if it is already out of your account. The easiest way to do that is to not allow you access until it is believed to have cleared.
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The hold period is to allow the check to go through the clearing process. Many banks are just too busy to call customers and verify information. They also may not even have the contact information to do that. 