Most people expect to have access to deposited money the day after the deposit. But banks are permitted by their regulators to place a hold on large deposits that contain checks, and hold time can vary significantly from bank to bank. This is the law that establishes the maximum hold limits: http://en.wikipedia.org/wiki/Expedited_Funds_Availability_Act.
$5000 of the funds deposited by check must be made available by the next day. But any checks deposited in excess of $5000 may be subject to the bank’s hold policies. Here’s a summary of the maximum hold limits set by law on deposited checks:
- Checks from the same bank where the funds are being deposited = 1 banking day
- Local checks from another bank = 5 banking days (the entire US is considered one locality at the time of this writing)
- Non-local checks from another bank = 6 banking days or 11 days if the check is over $5,000
- A “special” hold can be placed on funds if the bank can demonstrate reasonable cause (which is undefined). Under such a hold:
- $100 must be made available the next day
- $4900 must be available with 5 banking days
- The remainder must be available with 11 days.
The banks can institute any hold policy they wish as long as it doesn’t exceed these maximums. The problem is that the policies are not the same from bank to bank and can be enforced or waived at the individual bank’s discretion. While the account holder’s history with the bank holds some weight, nothing is guaranteed. A company might deposit checks worth $20,000 one day with no hold placed on the funds, and the next week they might deposit $11,000 and the bank could decide to place a hold on the excess ($6000 in this example) for 5 business days. As you can imagine, this can wreak havoc if $11,000 was supposed to cover payroll or a tax payment.
It’s possible, when a business deposits checks over $5,000, that it could be a week before those funds are considered “available” by their bank. Additionally, many banks charging for processing cash over a certain amount in a deposit and the merchant fees on payments receive via credit card. It is a “damned if you do and damned if you don’t” situation.
In the past we saw this rarely. Only when unusually large checks,or checks from an extremely unusual source, were deposited was a hold placed on them. Now we are seeing more banks adopting a policy of using the maximum allowed holding period as the norm.
I want to encourage each of my clients to contact their bank to determine what their hold policy is on deposited checks and funds availability, if or when they might be subject to it, and how it might impact their business.
For more information on funds availability, see this FAQ from the Comptroller of Currency, part of the US Department of the Treasury: