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Holds on Your Checking Account

Holds on Your Checking Account

If you've ever tried to deposit or cash a check and have been told that there will be a hold placed on the funds, you can understand just how frustrating it is to not have access to your money right away. Although holds are annoying, it's important to understand what it is, why it's necessary, and how the process works.

What is a hold and why is it necessary?

A hold is a temporary delay in your funds' availability, usually around 7-10 business days. Holds are placed on your checking account when you are cashing or depositing a specific type of check. This is done to ensure and verify that the funds will clear before they are made available to the account. Holds and their timelines follow both federal and financial institution-level policies and are enforced by a financial institutions' frontline staff. Specific types of checks that frequently have holds placed on them are:

  • Checks with large dollar amounts
  • Out-of-state issued checks
  • Insurance settlement checks

Although it's irritating to not have immediate access to your money, especially if you need it, it's important to know that the hold is there to protect you. If the money does come back for any reason, and the funds had already been spent, you are responsible to pay it back. This can also lead to your account becoming overdrawn and cause other payments to bounce as well.

What is going on while a check is being held?

While a check is being held, it's going through the clearing process to ensure that the funds get to your account.

The clearing process itself is made up of several steps. First, the financial institution that receives the check for deposit encodes its dollar amount into the machine-readable numbers along the bottom of the check. Then the physical check is fed through a machine that scans its data. That data is then sent to a clearinghouse, which forwards the information to the financial institution that issued the check. The financial institution makes sure the check-writer’s account has sufficient funds to make the payment—if it does, the transaction goes through, but if the account has insufficient funds to complete the transaction, the check bounces. This process can often take over a week. 

What are some ways to avoid a 7-10 day hold?

Although federal guidelines often dictate the timeline for when holds should be placed, there are alternatives aside from waiting 7-10 days for a check to clear. You could have the money transferred directly to your account via ACH or direct deposit. You could also ask for a cashier's check, where the funds are guaranteed, although some financial institutions still require that a short hold be placed on these types of checks. It's also helpful to maintain a good amount of money in your account(s) that could cover a check in case the funds are released immediately and the check happens to bounce.

To possibly get your funds cleared sooner, simply call and check-in with your financial institution after a couple of days from when your check was deposited. This may help move things along, as your financial institution can see exactly where your check is within the clearing process. It's possible that the check has already cleared and can be made available to you the day that you call.

Have a Question?

For any questions or more information, contact a Member Services Representative at (920) 921-1123.

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