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Get to Know Your Funds Availability Policy


Funds availability refers to when you can access money that you’ve deposited into your account to pay bills, make purchases, and cover everyday expenses. With some exceptions, money that you add to your checking or savings account isn’t always available to use right away.

Federal regulations allow banks and credit unions to hold deposited funds for a set period, meaning you can’t use that money until after the hold is lifted.

Why Do Financial Institutions Hold Funds?

Financial institutions hold deposited funds for various reasons, but in most cases, it’s to prevent any returned payments from your account. Depending on the type of deposit involved, it can take several days for the money you deposit to be transferred from the payer’s financial institution to yours. Placing a hold on those deposited funds in the meantime allows the payment to clear your account.

Without a hold, you could write checks, pay bills or make purchases with your debit card against your balance. If the check you deposited ends up getting returned because the payer had insufficient funds, your financial institution would have to cover those payments. And, as a side effect, you could be charged returned check or overdraft fees for any transactions the financial institution must cover.

Funds availability holds protect you and your financial institution against the consequences of returned payments.

Why Do Financial Institutions Hold Checks?

Financial institutions hold checks to verify that the check will be paid. Anyone can write a check to you, but if there isn’t sufficient money in their account, the check will bounce. As mentioned above, this can create headaches for both you and the financial institution, especially if you’ve used funds from a bounced check to pay bills or make purchases.

Checks get special treatment compared to other types of funds because there’s a degree of uncertainty surrounding them. With checks, institutions don’t know if the check is collectible until it’s paid by the institution it’s written from. This is unlike some other deposit methods. For example, if you’re depositing $5,000 in cash, the financial institution has money in hand to credit to your account. And wire transfers are typically irreversible—the person who sent the transfer typically can’t get the money back, so your bank can credit those funds to your account without fear of a reversal later.

What Should You Do?

It is important to understand the funds availability policy of financial institutions you have relationships with. The credit union’s Funds Availability Policy can be accessed here. Get to know how your credit union protects you and other members from losses due to issues with deposited checks and other deposited items.

You also may want to discuss the best deposit option with a member service representative if you’re expecting a large payment. For example, let’s say that you’re selling your house and expect to pocket $40,000 at closing. Your closing attorney gives you the option of receiving a paper check or a wire transfer. In this scenario, the wire transfer may be better if your bank makes those deposits available the same or next business day. While you may pay a fee for a wire transfer, it could be worth the convenience of not having to wait two to five business days or more for a paper check to clear.

Lastly, be careful when accepting check payments from unknown or untrusted sources. For example, if you’re selling a car, and someone wants to pay you with a personal check, it may be safer to ask for a cashier’s check. Cashier’s checks are drawn against the financial institution’s funds rather than a person’s account and can offer more security and protection against check fraud.

Bottom Line

Understanding the funds availability policy at your current financial institution matters, so you know when your money is available to use. If you’re shopping for a new financial institution or will be soon, remember to consider funds availability policies and other features and benefits when choosing where to keep your money. It is important to find a financial partner that allows you to bank the way you need to.