Funds Availability And Your Bank Account: What You Need To Know (2024)

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

Federal regulations allow banks to hold deposited funds for a set period, meaning you can’t tap into that money until after the hold is lifted. But the bank can’t keep your money on hold indefinitely.

Federal law outlines rules for funds availability and how long a bank can hold deposited funds. Banks also can use their discretion when setting guidelines for making funds available to customers.

Here’s what you need to know about funds availability and how this works when making bank deposits.

What Is Funds Availability?

Funds availability describes when you can access the money you deposit into a bank account. Federal Regulation CC (Reg CC for short) offers a framework for banks to use when setting their funds availability policies. Specifically, Regulation CC covers two things:

• Timing for making deposits available to customers
• Guidelines for disclosing funds availability policies to customers

Under Regulation CC, the timing for when deposited funds will be available is usually based on the type of deposit, when you made it during the business day and, in some cases, the amount deposited.

Banks then can use these guidelines to create and implement funds availability policies. These policies are usually disclosed to you when opening your account initially. Many banks also make their funds availability policies accessible online.

Why Do Banks Hold Funds?

Banks can hold deposited funds for various reasons, but, in most cases, it’s to prevent any returned payments from your account. In other words, the bank wants to make sure that the deposit is good before giving you access to the money.

Depending on the type of deposit involved, it can take several days for the money you deposit to be transferred from the payer’s bank to your bank. 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 bank would have to cover those payments. And, as a side effect, you could be charged returned check or overdraft fees for any transactions the bank has to cover.

Funds availability holds protect you and the bank against the consequences of returned payments. Having your bank hold a check can work in your favor if it allows you to avoid overdrafts and their associated fees.

Why Do Banks Hold Checks

Banks 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 bank, 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 bank 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.

How Long Can a Bank Hold Funds?

Banks have to follow certain guidelines when establishing a funds availability policy. Regulation CC permits banks to hold certain types of deposits for a “reasonable period of time,” which generally means:

• Up to two business days for on-us checks (meaning checks drawn against an account at the same bank)
• Up to five additional business days (totaling seven) for local checks
• Longer hold periods, when the financial institution can prove a lengthier hold is reasonable

Funds availability timelines can vary, based on the type of funds being deposited. This Regulation CC funds availability chart breaks down funds availability for different types of deposits covered by the federal guidelines.

Aside from funds availability at your bank, there are other scenarios where funds paid to you may be held temporarily. For example, say you run a business online and use a PayPal account to process payments. The PayPal funds availability policy allows for funds credited as a pending balance to be held up to 21 days. This allows PayPal enough time to ensure there are no problems with the order and the customer is satisfied before releasing the money to you.

eBay follows a similar policy. It may hold payments received for up to 21 days to verify transactions were completed successfully. Once eBay determines that an order has been delivered, funds on hold can be released to you within 24 hours.

How Long Can a Bank Hold a Check by Law?

Under Regulation CC, banks must follow the Federal Reserve guidelines for determining how long to hold checks. As mentioned above, banks can only hold checks for a “reasonable period of time,” as defined by Regulation CC.

In terms of how long it takes a check you deposit to clear, it generally ranges from two to five business days. It’s important to keep the timing in mind if you plan to write checks to pay bills, schedule electronic payments or make purchases with your debit card. In some instances, your bank’s funds availability policy may allow for longer hold times under extended funds availability rules.

It’s also important to know your bank’s daily cutoff time for processing deposits into your account. After the cutoff time, the deposit will be processed with the next day’s batch of deposits.

The cutoff time for making deposits at a branch may vary from the cutoff time for making deposits at the ATM or via mobile check deposit. Again, this information should be delivered to you by the bank as part of your account agreement, and you also may be able to find it at your bank’s website.

Extended Funds Availability

Regulation CC allows banks to have some leeway in determining funds availability hold times for certain types of deposits. The regulation requires your bank to notify you that the funds are being held and when they’ll be made available to you.

Here’s a quick rundown of the scenarios where you may be subject to a longer hold time on deposits, according to the Regulation CC guidelines:

• New account deposits. Next-day deposits are only allowed for cash, electronic payments and the first $5,000 of checks; remaining funds are made available the ninth business day.
• Large deposits. Deposits of more than $5,000 (excluding cash or electronic payments) have second business day availability for the first $5,000; seventh business day or later for the remainder.
• Redeposited checks. A check deposited once and returned unpaid can be held until the seventh business day.
• Excessive overdrafts. Deposits made to accounts that have been overdrawn six or more times in the previous six months can be held until the seventh business day or later.
• Potentially uncollectable checks. Checks that may not be payable (because they’re fraudulent, are post-dated or exceed your account balance) can be held until the seventh business day or later.
• Emergency deposits. Deposits made under emergency conditions, such as a natural disaster or power outage, can be held until conditions allow the money to be credited to your account.

These situations can apply to deposits made at brick-and-mortar banks, online banks and credit unions. Again, financial institutions are bound by Regulation CC to ensure that hold times, whether regular or extended, are within reasonable limits.

Expedited Funds Availability Act

The Expedited Funds Availability Act (EFAA) was passed in 1987 to address concerns over the length of time banks were holding customer deposits. The EFAA, implemented by Regulation CC, established maximum permissible hold times for checks and other deposits. With checks, the EFAA requires that:

• No more than one business day passes between the day funds are deposited and the day they’re made available for local checks.
• No more than four business days may pass between the day funds are deposited and the day they’re made available for nonlocal checks.
• Not more than $400 (or the maximum amount allowable in the case of a withdrawal from an automated teller machine but not more than $400) of funds deposited by one or more checks shall be available for cash withdrawal not later than 5 p.m. of the business day on which funds become available.

The Expedited Funds Availability Act aims to ensure that customers aren’t waiting on hold indefinitely to access their deposits. The Act also requires banks and other financial institutions to inform customers about their funds availability policies and how they work. This information is provided through a funds availability disclosure.

Check Your Bank’s Funds Availability Policy

Whether you’re brand-new to your particular bank or have been there for years, it’s helpful to understand what kind of funds availability policy is in place.

Start with the types of deposits you make the most often. For example, if you rely on mobile check deposit to deposit checks, you should know how long you can expect funds to be held. The same goes for electronic deposits.

You also may want to discuss the best deposit option with your bank 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 bank’s funds rather than a person’s account and can offer more security and protection against check fraud.

Which Banks Make Funds Available Immediately

Finding banks with immediate funds availability can be challenging, but it’s not impossible. Some banks shorten the gap for funds availability and make your money accessible faster—sometimes for a fee.

Here’s an overview of some credit unions and banks with immediate funds availability options.

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 bank or will be soon, remember to consider funds availability policies and other features and benefits when choosing where to keep your money.

Frequently Asked Questions (FAQs)