I deposited a check from a very large reputable business in the amount of $5,183.40 (I have deposited checks from this same company several times prior each ranging from $1,000.00 to $2,000.00) My concern is that my bank refused to allow the check to clear for five business days which caused me to overdraw by $100 so far - it won't clear for two more days, I may overdraw my account more. Can my bank do this? My prior financial institution has never done this and my deposits were alway immediately available for withdrawal. Also, I just received my bank statement today and it indicates that my ending balance as of 04/22/2007 was $5,193.34 - but according to my associate at the corporate office of my bank, my available balance was negative approximately $38.00 This doesn't make sense, I cannot have access to this money, but they can place it on my bank statement and draw interest off of it. Is this ethical? Is my bank doing something unfair or illegal?
Banks are permitted to hold funds deposited in check form. If the check is drawn on a bank that's outside your bank's local check processing region, those funds (except for the first $100) can be held until the fifth business day after the day you deposited them.
Your bank should have explained its funds availability policy when you opened the account. If it said at the time that it routinely holds non local checks for five business days, it's not obliged to inform you of a hold at the time of your deposit. If, on the other hand, the bank's disclosure says that its normal policy is to provide next day availability on check deposits, the bank is obliged to inform you when it places what is called a "case by case" hold (an exception to its norm).
If you had notice of the bank's hold (either in its policy or at the time of deposit), yet wrote checks against the deposit in spite of the hold, your bank is not at fault. When you overdraw your available balance, the bank is permitted to charge an overdraft fee and pay your check, or charge a return check fee and bounce it.
The balance showing on your bank state is what's called your "ledger balance." It's your full balance without regard to any holds. Your available balance is equal to your ledger balance less any holds, and has been driven negative by your overdrawn checks.
If your bank disclosed its funds availability policy correctly, it's doing nothing illegal or unethical as far as we can see. If it did not disclose a practice of holding funds from check deposits, and failed to give you a notice at the time of deposit (or by the next day at the latest), this is a different matter. In such a case, you need to ask for a full refund of charges, and a release of the current hold.
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Banks are permitted to hold funds deposited in check form. If the check is drawn on a bank that's outside your bank's local check processing region, those funds (except for the first $100) can be held until the fifth business day after the day you deposited them.