Hands up! Fine print
hides bank 'holdups' that slow clearing of checks
Bank holdups are rampant.
Not the kind
involving guns and masks, but the ones where a bank takes your money
and refuses to let you have it for several days.
These are legal "holdups,"
sanctioned by the federal government.
Knowing when you can get
your hands on the money from the check you just deposited is more
important than ever. Debit cards and speedy electronic check-clearing
increase the chances of bounced-check fees if you start spending
without having read the fine print.
The same goes for the ATM.
Arriving at the machine expecting to get all the money you need
may be foiled by long check holds and limits on how much the bank
will give you that day.
Banks hand out their policy
on when, and for how long, they can defer access to your deposits
at the time you open the account. Like most tedious-looking documents,
the check-holding rules are often ignored.
you don't ask, they won't tell
The problem is, in most cases, the bank is not required to remind
you when it plans to sit on your check a few days.
"A bank doesn't have to give
you a notice that there is a hold every time you deposit a check,"
says Stephanie Martin, managing senior counsel for the Federal
"Only when there is an extended
hold that is an exception to a bank's routine policy do they have
to tell you."
A customer who hasn't checked
the fine print could damage a good record with their bank.
"People should make sure
they know what the bank's availability policy is," says Martin.
"A lot of people don't care. They only care that one time."
Banks place holds on checks
to give them time to clear, thus avoiding losses. They also make
profits off dormant deposits.
know when to hold -- and fold -- them
The Expedited Funds Availability Act, enacted in 1987, lays
down the rules on the availability and collection of monies for
all state and nationally chartered banks, thrifts, credit unions,
and savings and loans.
In accordance with that law,
there are three standard hold periods: one, two and five business
For example, the act allows
banks to hold local checks up to two business days, and out-of-state
checks and ATM deposits up to five.
But don't expect a warning
every time. If the hold is not an exception to rules you were given
in the first place, the bank is not required to remind you.
"The customer has some responsibility here," says Nessa Feddis,
senior federal counsel for the American Bankers Association, a Washington,
D.C., trade association.
"It would take an enormous
amount of time and resources if a bank did a notice every time you
made a deposit."
Banks are required to tell
you when money is tied up beyond normal limits in the following
- You are a new
- You have deposited more
than $5,000 in the same day.
- You are redepositing a
check because it was returned unpaid, lacked an endorsement or
- You have a history of
overdrawing your account.
- The bank has "reasonable
cause" to doubt the collectibility of a check.
- Bank emergencies such
as computer breakdowns.
In these exceptions, the
bank must tell a customer -- either at the time the deposit is made
or via a notice mailed the following business day -- how much is
being held, the reason an exception is being invoked and a time
frame for when the money will be available.
The law says banks can extend
availability in these cases "by a reasonable period."
Customers who have bounced
several checks are in for a lengthy probation period.
"Banks can place extended
holds on deposits for these customers for six months," says Martin.
Banks also have a lot of
leeway with foreign checks. "Those aren't subject to the availability
rules," says Martin. "It is up to the bank."
In addition, a bank might
charge a fee for handling a check from an overseas bank.
around the holds
There are half a dozen easy moves consumers can make to circumvent
- Use direct deposit for
- Take advantage of linked
accounts and transfer money to cover your needs until deposited
checks can be accessed.
- Consider overdraft protection
through a savings account or a line of credit to get you through
holding periods. But be careful of costs for this service, particularly
with a line of credit.
- If you need fast access
to money coming from out of state, and are willing to pay extra,
consider a wire transfer to your account or Western Union delivery.
- Ask your bank about
sending the check out for collection to speed up the clearing
process. This requires special handling, though, so expect a
- If you are a good customer,
banks are sometimes willing to bend a little, so kindly ask
the branch manager to shorten the hold.
to the (ATM) machine
Using an ATM means playing by a new set of bank rules.
Customers should avoid depositing
money at the ATM because banks usually have earlier cutoff times
for automatic teller deposits. You can run into a two-day wait from
your own bank, and five business days for money deposited at another
Don't expect to withdraw
massive sums from the ATM. Banks limit the amount you can withdraw
in a day from teller machines. Consumers should check with their
bank on what the daily maximum is.
And make it a point to obtain
a copy of the bank's availability rules, which should be available
in a brochure at the branch.
"What's important to the
customer," says Feddis, "is to know your bank's policy."
-- Updated: Jan.