Some of you may have noticed that the number of check holds being placed on deposited checks is increasing a little. Even the most liberal of financial institutions are being more cautious these days and it's a sticky situation for both consumers and the bank or credit union. After all, no one likes to have their money held, especially around the holidays. But, there are reasons that we place certain checks on hold.

What is Reg CC?

Regulation CC is the Funds Availability Policy, or less formally known as the rules financial institutions follow when it comes to holding checks. This regulation gives financial institutions the right to hold your checks for a certain amount of time to ensure the item will clear before they give you access to the cash. However, there are certain items that cannot be placed on hold.

- Cash
- U.S. Treasury checks
- U.S. Postal money orders
- Official/Cashier's checks less than $5,000

If your bank is placing these items on hold, then you may want to speak to a manager about their policy because they shouldn't be.

The regulation also determines the length of the hold that a financial institution can place on the check, as well as the reasons. Keep in mind that much of the legislation behind Reg CC was written in the 70s and hasn't really been updated much since them. The hold times are reflective of the time it took to process when the laws were originally written.

Hold Times

If an account is a new account, which is defined as less than 30 days old, then the financial institution can hold any check (minus the exclusions listed above) for a maximum of 11 business days...note the word business. The funds would then be made available no later than the 12th business day. My credit union only holds new account checks for 10 business days and releases on the 11th business day; however, it's really rare that we do this unless there is something suspicious about the check in question.

If the account is not a new account, i.e. anything over 30 days old, then the hold times will be determined one of three ways; whether the check is local, nonlocal, or if it's facing an exception hold. But, these terms are a little misleading to consumers because you may bring in a check from across the street and it not be a local check.

  • Local check means that the issuing bank routes their checks through the same Federal Reserve as the bank that you are depositing with. Like I said, the two banks may sit across the street from one another, but that doesn't mean they are local to one another. The hold times for these checks are usually two business days.
  • Nonlocal checks refer to those that are routed through a different Federal Reserve than the bank you use. The hold time for these are usually five business days.
  • An exception hold means that the account is over 30 days old, but the bank has reason to believe the check won't clear and so they are given the right to place these items on hold for up to 11 business days.

Reasons for a Hold

There are several reasons a financial institution would place a check on hold, one of the primary reasons being that it's a new account. This particular practice is one of the best defenses a bank has against scams and fraudulent checking accounts. If someone is asking for cash back from a deposited check, we're giving them the cash believing in good faith the issuing bank will send us the money from the check. If they do not, for whatever reason, then we're out that money. So, there are specific things we look at when it comes to placing items on hold.

  • Credit card checks - I can tell you that 99.9% of the time financial institutions will place these items on hold. The reason is that even though we can call the credit card company and verify the check is good, we can't get anything else. The credit card company doesn't freeze the amount of the check when we call, so the consumer could potentially not have the amount of the check available when the check tries to clear. In a fraud situation, this is a potential loss to the bank.
  • Excessive NSF activity - If your account is always overdrawn and you're trying to deposit a check that is out of character with your activity, then there will probably be a hold. We want to make sure that we're getting the money from the other bank before we give it to you.
  • Large dollar check inconsistent with normal deposits - You get a $50,000 check and your account only has an average balance of $1000, you bet we're placing that on hold. People in their banking have regular patterns and anything outside of that is a red flag. Not that you couldn't have gotten a windfall or something, but remember the scams out there are in full force for the holiday and with the recession and subprime mess, banks are going to err on the side of caution.
  • The bank receives notification that the check might not clear - This could be that the issuing bank reports some sort of problem with the check, or the business contacts the bank saying it may not clear, etc. This will usually fall under the exception hold guidelines.
  • Teller gut feeling - Nothing personal, but we're trained to pay attention to the big picture. If your story doesn't add up and the check looks funny, we're probably going to place the check on hold. This is rare that we have flat out bad feelings about people and their checks and usually is for new accounts, but it still happens.

The most common reason for a hold on your check is the NSF activity and the inconsistency with your normal deposits. Otherwise, you're probably ok. It's also worth mentioning that these rules apply only to your checking account. If it's deposited to your savings account, then the bank can place the hold up to 30 days if they wanted to. But, if your bank is doing that, I suggest finding a new place to do business.

Now, you have a couple of options if your bank tells you they're going to place a hold on the check. You can request that your bank try to verify funds. Most of the time, banks won't share this information because of privacy laws; however, technically, we can read the amount over the phone and the bank can tell us yes or no to the funds clearing. Some just absolutely won't share that information and then there's nothing we can do. But, this is a lot like the credit card checks in that, even though we've verified the funds are there right that moment, there's no guarantee that they'll be there when the check routes to the issuing bank.

In that case, there's one of two things you can do. If the issuing bank is close by, you can head over and request that the check be turned into an official/cashier's check or you can simply cash the check with the issuing bank. The downside to these options is that there may be a fee imposed by the other bank. I haven't heard of too many charging to exchange the check for an official/cashier's check; however, I know several banks do charge non-customers to cash the checks upwards of $5 or more - which is ridiculous in my opinion, but what do I know?


Now, there are some disclosure rules to this as well. If the bank places the check on hold while you are depositing in person, then they must tell you a hold is being placed and give you a receipt of some kind letting you know when the funds will be available. If the deposit is made by phone, fax, mail, ATM, or night drop, then they must mail you a notification immediately.

Things to know

Here are just a few more things to know about having your checks placed on hold.

  • $100 must be released for next-day availability
  • If you spend the money while funds are on hold, you will receive fees - that money is not available to you until the hold has been removed
  • Official/cashier's checks over $5,000 can be placed on hold

I hate having to put a hold on a check, but when there's even the slightest possibility that the check could come back, we have to place it on hold. It's as much for the consumer's protection as it is for the financial institution, though I know most people like to think otherwise.

What has your experience been with check holds? Is this something you agree or disagree with, and why?