Banks--Let Go of My Money

Putting a Hold on Funds Deposited to Your Account

It happened to me just the other day, and I decided to review the law on how long a bank can place a "hold" on money deposited into your account.

In my case, a check was deposited into my account, and my bank decided it would put a hold on the "uncollected funds" from that check, before I could have use of the money.  My bank told me it was going to release $200 from the check for my use immediately, but most of the funds would not be available for another 2 business days.  My bank also told me that the remainder of the funds would be available in about 5 days.  When I asked about the policy, the branch manager told me the matter was out of his hands, and there was nothing he could do about it.

But I believe there is more to the story.

Under the Expedited Funds Availability Act (EFAA), effective 1988, and  the Check Clearing for the 21st Century Act, effective 2003 (Check 21), a bank generally must make all funds available to the account holder by the second business day.

These laws were passed to stop the once-widespread practice by banks of "floating"depositor funds to finance the banks' own investments and earn lots of money from the interest of other people's money.  With today's digital technology, there is no rational justification for banks keeping depositors' funds away from them for more than 48 hours, and a strong case can be made that banks should make funds available even more quickly. This practice should be whether the account holder has 100 dollars or 100 thousand dollars in her account.

Today, banks must follow the law and regulations in this area, but most consumers do not know that the law is on their side when it comes to funds available sooner, not later, than most banks advise.  According to the Federal Reserve, here are the rules:

Banks can place "holds" on checks for a variety of reasons. Most commonly, banks hold a check because the collection of the money may be in doubt or the check looks suspicious for some reason. Holds may also be placed when a large dollar amount (more than $5,000) is deposited or when funds are deposited into a new customer's account.

A federal law, the Expedited Funds Availability Act (EFA), contains rules that allow banks to delay or "hold" funds deposited by check. You may want to review the account agreement you received when you opened your account for details about your bank's funds availability policies and procedures. A bank must give you a copy of its deposit availability disclosure upon request.

When Will Your Funds Be Available

Type of Deposit	When Available **
Direct deposits	Day of deposit
Wire transfers	Next business day (Mon-Fri)
First $200 of any non-"next-day" check deposited	Next business day (Mon-Fri)
Cash*	Next business day (Mon-Fri)
U.S. Treasury checks (deposited in person or at ATMs owned by your financial institution)	Next business day (Mon-Fri)
U.S. Postal Service money orders*	Next business day (Mon-Fri)
State or local government checks*	Next business day (Mon-Fri)
Cashier's, certified, or teller's checks*	Next business day (Mon-Fri)
Checks and money orders drawn on another account at the same financial institution	Next business day (Mon-Fri)
Federal Reserve Bank and Federal Home Loan Bank checks*	Next business day (Mon-Fri)
Any other checks and non-U.S. Postal Service money orders	Second business day (after the day of deposit)
Deposits (of items noted by "*") made at an ATM owned by your financial institution	Second business day (after the day of deposit)
Deposits made at an ATM not owned by your financial institution	Fifth business day (after the day of deposit)

* Deposited in person
** Maximum hold allowed; your funds may be available sooner - check with your financial institution

So if your bank tells you something different, don't be afraid to ask them whether they are in compliance with the Expedited Funds Availability Act, as amended by the Check 21 law.

That should get their attention--and maybe even loosen up some of your own money  in your bank account, sooner than expected. Remember, when it comes to banking, the law is on your side.