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What is a check hold?
A check hold is the length of time a financial institution can hold funds deposited by check before it credits a customer’s account. In most cases, the customer can only use the funds once the check hold ends and the check has cleared.
The Federal Reserve requires that a bank hold most checks before crediting the customer’s account for no longer than a “reasonable period of time,” which is generally regarded as two business days for a same-bank check and up to six business days for one drawn on a different bank.
For deposits beyond $5,000, the bank must make the first $5,000 available under its general check deposit policies, but can delay availability on the remaining amount above $5,000. Other banks have additional policies stipulating how much will be made available immediately, with some banks allowing the first few hundred dollars to post before the rest of the check clears.
A bank can also place a check hold on the entire amount of the check under any of the following circumstances:
- The bank has reasonable cause to doubt the validity of the check
- The customer is re-depositing the check
- The account owner has overdrawn multiple times over the past six months
- The check is deposited during an emergency beyond the control of the bank, such as a communications problem or a natural disaster
- The check goes into an account that has been open for less than 30 days
Exceptions include money orders; Treasury checks; Federal Reserve Bank and Federal Home Loan checks; cashier’s, certified, or teller’s checks; and state or local government checks. Check holds also don’t apply to funds sent by electronic wire transfer or direct deposit.
Once your check hold has lifted, you might consider placing the cash in a new savings account.
Check hold examples
Akira just collected a $5,900 check for services he rendered to a client. He deposits the check using his bank’s smartphone app, but the check is still subject to a hold. The first $5,000 is available immediately. However, because the check is from a different bank that the one he uses, the $900 takes four more business days to clear.