||Ask Dr. Don
Dear Dr. Don,
How long can a credit union hold a deposit of
an out-of-town check?
Commercial banks, savings banks, savings and loans and credit
unions all have a funds-availability policy that determines when
a deposit will be available for your use.
The key to funds availability is the determination
whether the deposited check is considered local or nonlocal. With
certain exceptions, funds deposited as nonlocal checks have to be
available by the fifth business day following the day of deposit.
Funds deposited as local checks have to be made available
by the second business day following the day of deposit. With some
deposits, the financial institution is required to make the money
available on the next business day.
The following types of deposits must be made available
on the first business day following the banking day of deposit ("next-day
1. Cash deposited in
2. Electronic payments
received by the institution for deposit in an account. An electronic
payment is considered received (deposited) when the institution
has received both payment in collected funds and information on
the account and the amount to be credited. (Under other rules,
funds for most electronic deposits are made available on the day
3. U.S. Treasury checks
deposited in an account held by a payee of the check. Unlike deposit
types listed in four through eight below, which pertain to deposits
made in person, Treasury checks deposited at an ATM owned by your
institution (a "proprietary" ATM) must be accorded next-day
4. U.S. Postal Service
money orders deposited in person into an account held by a payee
of the check.
5. Federal Reserve
Bank and Federal Home Loan Bank checks deposited in person into
an account held by a payee of the check.
6. State or local government
checks deposited in person into an account held by a payee of
the check, if the institution is in the same state as the payer
of the check. (Note: If the customer desires next-day availability
of funds from these checks, the bank may require use of a special
7. Cashier's, certified,
or teller's checks deposited in person into an account held by
a payee of the check. (Note: If the customer desires next-day
availability of funds from these checks, the bank may require
use of a special deposit slip.)
8. Checks drawn on
an account held by the institution ("on-us checks")
deposited in person to a bank employee or an on-premises ATM or
night depository, if the branch or branches involved are in the
same state or check-processing region.
9. Deposits that include
some checks of types not listed above. The first $100 (or the
amount of the deposit if it is less than $100) of non-"next-day"
checks must be made available the next day.
Exceptions: When deposits of types
one, four, five, six and seven are not made in person (for
example, when they are made at an ATM), the funds must be
made available by the second business day. Deposits, cash
or check, made at an ATM that the bank does not own (a "nonproprietary"
ATM) must be made available by the fifth business day.
Source: The Federal Reserve
for Financial Institutions Compliance with Regulation CC
Financial institutions are allowed to treat differently
new customers, customers with a prior history of overdrawing their
account, checks deposited during emergency conditions and checks
that the bank is doubtful about their ability to collect.
Regulation CC and The Expedited Funds Availability
Act of 1987 provide the standards for financial institutions in
EFAA provides a standard of two-thirds as a rule-making
guide for the Federal Reserve Board. This means that the hold period
for nonlocal checks should be the approximate length of time when
two-thirds of returned checks are returned.
This means that banks should only be at risk for one-third
of checks returned to them, a standard approved by Congress in the
EFAA. Under Regulation CC, financial institutions are required to
post their funds-availability policy and provide a notice of funds
availability on the front of all preprinted deposit slips.
-- Updated: April 9, 2003