Check Hold

Understanding Check Holds: What You Need to Know

Demystifying Check Holds

Unraveling the Concept

A check hold refers to the duration during which a bank can legally retain funds from a deposited check before crediting them to the depositor's account. This period varies based on regulatory guidelines and bank policies.

Exploring the Mechanism

How Check Holds Function

Enacted in 1987, the Expedited Funds Availability Act (EFAA) established guidelines for check holding periods. Originally, local checks could be held for up to two business days. However, following the transition of all checks in the U.S. to local status in 2010, this hold period was extended to five days.

Understanding Regulations

Regulatory Framework

The Federal Reserve mandates that banks hold most checks for a "reasonable period," typically two business days for same-bank checks and up to six business days for checks drawn on other banks. This regulation, also known as Regulation CC, governs check holds across financial institutions.

Types of Check Holds

Varied Holding Policies

Banks may impose different types of holds on checks, including holds on large deposits exceeding $5,000, re-deposited checks, and checks from accounts with a history of overdrafts. Additionally, holds may be placed on checks deemed doubtful for collectibility or deposited during emergency conditions.

Exceptions to Holds

Exempted Funds

Certain types of checks, such as cash, electronic payments, and government-issued checks, are typically exempt from holding periods. Moreover, banks are required to disclose their hold policies to customers and provide written documentation upon request.