New checking accounts have tougher rules
By Lucy Lazarony • Bankrate.com

It could happen to you if you're not careful.

It's called the new account blues.

For your first 30 days as a checking account customer, your money goes into a bank's coffers a whole lot quicker than you can get it out. That's because lengthy "hold" policies on checks deposited by new customers make it tough for people to get their hands on their own money.

It may be hard on people who have just moved into a town, but it's perfectly legal. Federal regulations establish how long banks can hold your checks, but they give wide latitude and abundant exceptions to banks handling new accounts. As long as it's sticking to those federal regulations, your bank gets to call the shots. You can't withdraw cash or write checks on that money until it says so.

Squeaky wheels get cash
The only good news: Squeaky wheels get the cash. You may be able to get an override on a hold if you ask the right questions to the right branch employee.

Many folks may need to. It can be awfully tough to pay your bills on time if your payroll check is being held for a couple of weeks.

Wes Mills of Lewisville, Texas, learned this lesson the hard way.

He had opened a checking account with NationsBank and deposited $100 cash. An employee of the bank, which has since merged with Bank of America, told him most of his checks would be held. When he asked if his paycheck would be held, Mills says, he was told "no" and that all he had to do was notify the teller or write a note on his ATM deposit envelope and his check would clear.

When it came time to deposit his paycheck, he went to his bank. Again, Mills says, he asked if his payroll check would be held. Again, the teller told him "no" and to "go ahead and write what checks you need ... they shouldn't bounce."

But two checks did bounce and Mills got zapped with two bounced-check fees.

"I was miffed that even after I did what they told me to do -- they still bounced," Mills says.

It took a couple of months of wrangling with NationsBank's customer service department before he got refunds for his two bounced-check fees.

Federal law allows tougher policies
Mills may have been the victim of poor customer service, but NationsBank had every right to hold his payroll check. Federal law allows banks to have tougher availability policies for new customers.

Often, new checking account customers cannot access their cash as quickly as established customers can.

The rules for accounts older than 30 days are set by the Expedited Funds Availability Act. It says a bank must clear funds from a local check -- a check drawn from a bank in the same federal check processing region as the depositor's bank -- no later than the two business days after the check is deposited.

Money from nonlocal checks, which are drawn from banks outside the federal processing region of the depositor's bank, must be made available to customers no later than five business days after the day of the deposit.

For new customers, folks who have had a checking account with a bank for less than 30 days, those rules go out the window.

"There's no limit," says Stephanie Martin, managing senior counsel with the Federal Reserve Board. "It's up to the bank."

Policies vary bank to bank and state to state
Some banks hold local and nonlocal checks for seven business days. Others hold them for 10 business days. Also, keep in mind that banks may vary availability policies from state to state and even market to market.

So a SunTrust Bank customer in rural Georgia may be able to get to funds quicker than a SunTrust customer in Miami.

"Availability policies vary from market to market," say Mike McCoy, a SunTrust spokesman. "It's something that is locally market-driven."

New customers also miss out on the "$100 rule." It grants bank customers access to the first $100 of a day's total deposit on the next business day.

New customers can get their hands on deposits from certain checks through special next-day availability requirements. These checks include cashier's, certified, teller's, traveler's and state and local government checks. The first $5,000 of these kinds of deposits will be available to customers on the next business day.

This goes for new customers as well, under some conditions. The checks must be made payable to you and you must make the deposit in person. Your bank may also require that you use a special deposit slip. Be sure to ask.

Anyone may receive a copy of a bank's funds availability policies by stepping up to a teller and asking. Be prepared. These booklets, while chock-full of valuable information, are not fun to read. Some spots can be difficult to decipher. If you have questions, ask.

Cash and electronic deposits easiest to access
The rules concerning cash and electronic deposits, such as wire transfers and direct deposits, are the easiest to understand. Federal regulations require banks to make all money from these types of deposits available on the next business day. This goes for new customers, too. Some banks allow same-day withdrawals.

Remember federal regulations stipulate the longest possible period that a bank may keep your money away from you. A bank may choose to have more lenient policies.

"They can't do worse than the regulation, but they can do better," Martin says.

"Most of the smaller banks and credit unions are more lenient in their policies than some of the big banks."

Your bank may be willing to bend the rules of their own policy -- if you ask nicely enough.

"Typically, we have the ability to make an exception on a case-by-case basis," says Paula Pearson, a senior vice president at SunTrust Bank, South Florida.

It also depends on whom you ask. Veteran employees often have more authority to waive rules for individual customers.

Take your questions to the top
That's why it's a good idea to take your questions to the top. Ask for the head teller or the branch manager. Be persistent.

It worked for Bruce James of Beaumont, Texas. He opened a checking account with a local bank using a $35,000 cashier's check from another local bank.

He was told that the first $5,000 of the deposit would be available the next day and the rest would be available in a couple of weeks.

He told the teller:

"It's a cashier's check from a bank down the street. You can see the bank from here. I'll drive you down there. It's only eight blocks away."

James, who had worked in the computer department of a national bank for seven years, asked for the branch manager. He made his case again. He also pointed out to the branch manager that he already had other accounts with the bank.

"I said, 'This is ridiculous. You know me. I know you. I've been a customer for years.' "

So the branch manager contacted the other bank and James had access to all of his money by the next day.

"He was very nice about it," James says. "It was nuts."

He adds, "You as a customer have to know what the rules are. The bank is not going to tell you because it's not in their best interest. If you don't know the right questions to ask, you're going to be hung out to dry with a lot of bounced checks.

"It's a classic case of 'know your bank.' "

--Updated: April 9, 2003