Banks can hold check funds for a period of time, regulated by the US Federal Reserve Board, depending on the type of check deposited. The concept of “business day” is important, and local versus non-local checks have different funding timelines. Other circumstances may also result in a check hold.
When a person deposits a check at a bank, the deposit may be subject to a check hold. A check hold is a period of time during which a bank can hold check funds without dispersing the funds to the depositor. The amount of time a bank can hold a check varies depending on the type of check being deposited and can range from one business day to 11 or more days. In the United States, this amount of time is regulated by the United States Federal Reserve Board under Regulation CC. Banks are required by law to disclose their check retention policies to their customers.
An important concept to understand when learning about check retention is “business day.” The Federal Reserve Board defines a business day as the days Monday through Friday, excluding any federal holidays, during which the bank conducts normal transactions. Banks do not have to disperse funds until the next day after a deposit, or on an “overnight availability” basis. Deposits that must be dispersed no later than the day after deposit include a Treasury check deposited at the bank’s ATM, cashier’s checks deposited through a teller, state checks deposited through a teller, and in many cases, checks from the same banking institution. If a person deposits a check through an ATM that is not owned by their bank, the bank can hold the check for five days.
Two other concepts to understand when looking at bank holds are “local” and “non-local.” Local versus non-local has nothing to do with being in the same city. Rather, local means that the bank where the check was deposited is in the same check-processing region as the financial institution from which the check was drawn. If a check is considered local, the check must be funded on the second business day after the check was deposited. For non-local checks, financial institutions must fund the check no later than the fifth business day after the check is deposited.
A financial institution may suspend deposit checks under other circumstances. For example, if a check being deposited is greater than $5,000 United States Dollars (USD), the amount greater than $5,000 USD may be held for a “reasonable” period of time. Additionally, checks that are deposited into accounts that are consistently overdrawn may be subject to a “check hold.” Financial institutions can also hold a check in a deposit if it comes from a post-dated check or a check that was written six months or more before it was deposited.
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