Banks long hold on deposit - Security or for Interest?

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
User avatar
Topic Author
tc101
Posts: 3362
Joined: Tue Feb 20, 2007 3:18 pm
Location: Atlanta - Retired in 2004 at age 54

Banks long hold on deposit - Security or for Interest?

Post by tc101 »

When a bank puts a long hold on a large deposit to a checking account, is it generally for legitimate security purposes or just to hold the money interest free for their profit?

The specific case I am wondering about: There was a deposit of $134,000 to my Bank America checking account on Monday, Dec 24, the day before Christmas. The bank will not make the funds available for almost 2 weeks, until Friday, Jan 4. There are two holidays, Christmas and New Years in there, so the hold is actually only for 7 business days. This is acceptable to me if there is a real security reason, but if they are doing it just for the profit on that interest free money I think I will change banks.
User avatar
DaveTH
Posts: 2504
Joined: Thu Apr 05, 2007 7:23 pm

Post by DaveTH »

It doesn't really matter why the bank is placing a hold on the funds as long as the funds availability policy is disclosed. Different banks have different policies, but generally they are designed to ensure that the check clears and to protect the bank from potential losses. The duration of the hold is based partly on amount. Most banks will continue to pay you interest during the holding period. It sounds like this may have been an ACH electronic transaction. I believe that the initiator of an ACH transaction has up to 7 business days to rescind the transaction.
Last edited by DaveTH on Fri Dec 28, 2007 6:11 pm, edited 1 time in total.
plake15
Posts: 1043
Joined: Sat Oct 06, 2007 8:28 am

Post by plake15 »

well even if the money is not available it is still earning interest..

you will see current balance-XXXXXXX
and then under it available balance XXXXXXX

once the money is in current balance if it's it's not available yet it's still earning interest..unless BAC has some thing where they don't..I doubt it though.
ZZ
Posts: 383
Joined: Mon Nov 12, 2007 4:42 pm

Re: Banks long hold on deposit - Security or for Interest?

Post by ZZ »

tc101 wrote:When a bank puts a long hold on a large deposit to a checking account, is it generally for legitimate security purposes or just to hold the money interest free for their profit?

The specific case I am wondering about: There was a deposit of $134,000 to my Bank America checking account on Monday, Dec 24, the day before Christmas. The bank will not make the funds available for almost 2 weeks, until Friday, Jan 4. There are two holidays, Christmas and New Years in there, so the hold is actually only for 7 business days. This is acceptable to me if there is a real security reason, but if they are doing it just for the profit on that interest free money I think I will change banks.
Same thing here almost exactly. Treasury transfer into BoA, similar amount. The only difference is it was in the summer w/no holidays. Took 17 days to clear. Couldn't transfer back out. It's not like the Treasury is going to write a hot check to BoA or is it? I think it's BoA playing with your money. Either that or the Patriot Act. The sale of a house and a wire transfer was available quickly. It must be something with ACH.

Wells Fargo does almost the same on my personal account w/smaller amounts. Transfer out and its gone. Transfer in and it's pending for several days. And yes, they do pay interest. I think it's something like .0000001% on a checking account :roll:
Last edited by ZZ on Fri Dec 28, 2007 6:31 pm, edited 1 time in total.
User avatar
SoonerSunDevil
Posts: 2000
Joined: Mon Feb 19, 2007 10:32 pm
Location: The desert

Post by SoonerSunDevil »

Why not use a wire transfer for such a large sum? Since the amount of the transfer is so large, I doubt you would incur any wire transfer fees, and if you did, I am sure B of A would be glad to accommodate a customer with a $134,000 balance in a low-interest checking account :) Additionally, your funds will be available immediately with a wire transfer.

John
User avatar
indexfundfan
Posts: 3078
Joined: Tue Feb 20, 2007 11:21 am
Contact:

Re: Banks long hold on deposit - Security or for Interest?

Post by indexfundfan »

tc101 wrote:When a bank puts a long hold on a large deposit to a checking account, is it generally for legitimate security purposes or just to hold the money interest free for their profit?

The specific case I am wondering about: There was a deposit of $134,000 to my Bank America checking account on Monday, Dec 24, the day before Christmas. The bank will not make the funds available for almost 2 weeks, until Friday, Jan 4. There are two holidays, Christmas and New Years in there, so the hold is actually only for 7 business days. This is acceptable to me if there is a real security reason, but if they are doing it just for the profit on that interest free money I think I will change banks.
The BOA's checking account pays peanuts in interest -- at the current yield of say 4.5% in a comparable savings account, you could be out by $281 in interest (before tax). I think in this age of the new Check-21 standard, there is no reason for the long holds which belong to the time when checks have to be physically delivered and cleared. However because the long holds benefit the banks, most banks do not bother with revising the hold periods shorter.

If you regularly need to deposit large checks, try another bank that has an higher-yield saving account -- like WaMu's online savings or Citibank's UMA. At least during the hold period, you are earning interest.

I closed my BOA checking account after experiencing the long holds and learning BOA's reply that there is nothing they could or want to do about it.

I did some research and found that Citibank has the shortest holds, and if my memory is correct, Citibank's maximum hold period does not exceed 4 business days while BOA's could go as long as 10 business days. Since then, I have moved my brick & mortar banking needs to Citibank.
My signature has been deleted.
ZZ
Posts: 383
Joined: Mon Nov 12, 2007 4:42 pm

Post by ZZ »

OUJohnNasr wrote:Why not use a wire transfer for such a large sum? Since the amount of the transfer is so large, I doubt you would incur any wire transfer fees, and if you did, I am sure B of A would be glad to accommodate a customer with a $134,000 balance in a low-interest checking account :) Additionally, your funds will be available immediately with a wire transfer.

John
Personally, I prefer to be over the FDIC limit while my transfer is pending. :o
User avatar
theduke
Posts: 628
Joined: Sun Sep 30, 2007 6:31 pm

Post by theduke »

I am currently having a similar problem. Had a cd at my bank mature and decided to move it to state credit union. Had the money deposited in my checking account and I gave a check to the cu. They put a seven day hold on it before they would place in a cd. No interest, but I could put it in a money market untill the hold is released. As of close of business today, still no money market and I gave them the check one week ago today.
sport
Posts: 9634
Joined: Tue Feb 27, 2007 3:26 pm
Location: Cleveland, OH

Post by sport »

When I make a large deposit to my checking account, I ask the bank for "next day availability". Normally, unless the deposit is a bank check, they will not give me that availability. However, they say that I should feel free to write checks, use a debit card, or make ACH transfers the day after the deposit. The "hold" only applies to cash withdrawals, bank check requests, or wire transfers. I have had this account for many years, and I don't know if this treatment is universally available, or a priviledge given to a long-time customer. Nevertheless, I can generally use the money the next day.

Best wishes,
Jeff
User avatar
indexfundfan
Posts: 3078
Joined: Tue Feb 20, 2007 11:21 am
Contact:

Post by indexfundfan »

jsl11 wrote:When I make a large deposit to my checking account, I ask the bank for "next day availability". Normally, unless the deposit is a bank check, they will not give me that availability. However, they say that I should feel free to write checks, use a debit card, or make ACH transfers the day after the deposit. The "hold" only applies to cash withdrawals, bank check requests, or wire transfers. I have had this account for many years, and I don't know if this treatment is universally available, or a priviledge given to a long-time customer. Nevertheless, I can generally use the money the next day.

Best wishes,
Jeff
This is probably a YMMV thing. Personally I would not attempt this unless I want to be hit with NSF fees.
My signature has been deleted.
sport
Posts: 9634
Joined: Tue Feb 27, 2007 3:26 pm
Location: Cleveland, OH

Post by sport »

indexfundfan wrote: Personally I would not attempt this unless I want to be hit with NSF fees.
I would also not do this as a matter of course. When I have a large check, I personally take it to a branch where I am known, and ask permission each time. I know which teller or manager has given me the OK. If NSF fees were to occur, I would just go back there and remind them of what they told me. However, I have never had any fees charged.

Best wishes,
Jeff
User avatar
Topic Author
tc101
Posts: 3362
Joined: Tue Feb 20, 2007 3:18 pm
Location: Atlanta - Retired in 2004 at age 54

Post by tc101 »

Several people have mentioned that the money in the checking account draws interest, but the interest is so low it is meaningless. I could probably move it into a bank money market for a few days but that would be more trouble than it is worth, because those MMF rates are so low.

I plan to invest the money at Vanguard when it becomes available. I will lose about $200 in interest which I find annoying but there is not much I can do about it.

I am wondering if I even need a brick and mortar bank. Schwab and Fidelity both have pretty good deals on banking, and pretty good service. I am not sure what Ing offers. I have used them for savings in the past. I had problems with the service at HSBC.

Is there a reason to have a brick and mortar bank?
User avatar
Topic Author
tc101
Posts: 3362
Joined: Tue Feb 20, 2007 3:18 pm
Location: Atlanta - Retired in 2004 at age 54

Post by tc101 »

I think the big mistake was having that large amount of money moved into the checking account. That was done by and escrow company, it is too complicated to explain here, but that was the mistake. I think I will keep a small free checking account at a local bank but be more careful about how large sums are transfered.
User avatar
dm200
Posts: 23148
Joined: Mon Feb 26, 2007 2:21 pm
Location: Washington DC area

I am in this business

Post by dm200 »

and believe the primary reason for such holds is for security, rather than gaining extra interest on the funds. Of course, there could be such reasons for certain institutions.

A few comments/suggestions:

1. For checking accounts, the holds are governed by Federal reserve regulation CC. For amounts of $5,000 or less, there are specific limits on the number of days a hold is allowed. Read the financial institution's funds availaibility policy.

2. Since checking accounts generally earn the lowest interest rate, perhaps initial deposit into a higher yielding savings account (linked with checking) might be better.

3. Consider using a credit union, rather than a bank. Sometimes credit unions pay higher rates on deposits. Make sure the credit union is federally insured.

4. As the saying goes, "Everything is negotiable" regarding holds on deposits. Banks and credit unions make exceptions to holds all the time. Get to know the folks at the financial institution, and see if they will waive the longer holds. I once had a cashiers check (over $5,000) that a bank wanted to place a 5 day hold, and I asked for a waiver. The branch manager agreed to check with the issuing bank when the check was paid, and then release the hold. It was then a one or two day hold. I manage n organization's funds, and our bank (a large, regional bank) places NO holds on any of our deposits at all. This is true even for large, out of state, personal checks.

dan
northend
Posts: 447
Joined: Tue Oct 02, 2007 10:28 am

Post by northend »

Is there a reason to have a brick and mortar bank?
Signature guarantee. I haven't run into a bank that will give me signature guarantee without having an account.
User avatar
alvinsch
Posts: 1612
Joined: Mon Feb 19, 2007 10:16 pm
Location: Northwest

Post by alvinsch »

tc101 wrote:I think the big mistake was having that large amount of money moved into the checking account. That was done by and escrow company, it is too complicated to explain here, but that was the mistake. I think I will keep a small free checking account at a local bank but be more careful about how large sums are transfered.
How long have you been with BofA? I've had this happen once or twice a year (just long enough to forget the rules), but only on ATM deposits and never on a ACH. Each time I've gone to the nearest branch and asked them if 2 weeks isn't rather extreme and they've immediately eliminated the hold in every case.

They suggested I never do a large deposit using an ATM as those are processed by other people who never even look at your account. If you deposit it with a teller they see your account and can see your history.

I'm surprised they put a hold on a ACH transfer as I have never had that occur and ACH money in and out of my BofA account a lot.

- Al
User avatar
Topic Author
tc101
Posts: 3362
Joined: Tue Feb 20, 2007 3:18 pm
Location: Atlanta - Retired in 2004 at age 54

Post by tc101 »

I'm surprised they put a hold on a ACH transfer
I don't think it was an ACH transfer. It is listed on the web site as a "counter credit". I don't know what that is. It was deposited by an escrow company that handled a loan that someone paid off.

I am going to drop by the bank Monday and talk to them and see what they will do. This is all complicated by the Holidays and at this point is not that big a deal but I want to learn just how this works.
User avatar
cato
Posts: 230
Joined: Thu Dec 20, 2007 7:39 pm
Location: Portola Valley, CA

Post by cato »

Many banks/financial firms will take up to the statutory limits to make funds available from a deposited check even if the funds have already moved. This is what banks refer to as "float." It's actually a line item in their income statements -- not an insignficant one. The interest on billions of $ of deposited checks is substantial, even if it's only for 3 or 4 days at a time.

I recently saw this when I deposited a check at Etrade and found they had not made the funds available until 3 days after the amount had been debited from the originating account. I pointed this out to them and they said "that's the way it's done." I moved all my money to an institution that clears funds when they move.

-cato
User avatar
ElJay
Posts: 690
Joined: Tue Jun 12, 2007 6:08 pm

Post by ElJay »

tc101 wrote:Is there a reason to have a brick and mortar bank?
The primary reason why I have one is to make about two deposits a year. I would rather not have to mail in the deposit and this is especially true when I need to deposit cash. How do people with purely online accounts make cash deposits? Granted I rarely have more than $200 in cash that I need to deposit, but it's still $200 that I'd rather not lose to theft. I greatly dislike the idea of depositing cash into an ATM unless it is one of the spiffy new machines which provide images of the cash (and checks) deposited on the receipt.
cato wrote:I recently saw this when I deposited a check at Etrade and found they had not made the funds available until 3 days after the amount had been debited from the originating account. I pointed this out to them and they said "that's the way it's done." I moved all my money to an institution that clears funds when they move.
I opened a CD at E-trade five business days ago via ACH and I still don't see the funds in my account... This is my first experience with them and I'm starting to get annoyed. I've received the paperwork saying the CD is open but their online system still shows me at $0.00. I guess the speed at which Vanguard executes things has been spoiling me. Even HSBC is faster, and I think their ACHs are pretty darn slow.
Allan
Posts: 875
Joined: Wed Feb 21, 2007 9:15 pm
Location: Houston

Post by Allan »

Anyone using a Remote Deposit Scanner? You can make deposits from your office or home without actually going to the bank by scanning the check you are depositing and sending in the deposit electronically. This may be more for businesses, but I know a couple of individuals who use this. I'm thinking about getting one. I hate going to the bank!

http://en.wikipedia.org/wiki/Remote_deposit
http://www.solveras.com/deposits.html
User avatar
tetractys
Posts: 4831
Joined: Sat Mar 17, 2007 3:30 pm
Location: Along the Salish Sea

Re: Banks long hold on deposit - Security or for Interest?

Post by tetractys »

tc101 wrote:When a bank puts a long hold on a large deposit to a checking account, is it generally for legitimate security purposes or just to hold the money interest free for their profit?
For security. If you have earned the banks trust, they may very well waive the hold period at your request. -- Tet
User avatar
dual
Posts: 680
Joined: Mon Feb 26, 2007 7:02 pm

Deposit in Fido B/M

Post by dual »

I had this happen to me at Wamu, although not as large an amount as you. I closed a CD and deposited a cashier's check in my Wamu checking acct with no interest. The b*stards put a 2 week hold on it.

Now, whenever I get a sizable check, I take it to the Fidelity office nearby and deposit it in my money market account. If you deposit before 2 pm EST they credit you that day. There's a PF Chang's across the street and I have lunch on the float money I avoided losing.
User avatar
Topic Author
tc101
Posts: 3362
Joined: Tue Feb 20, 2007 3:18 pm
Location: Atlanta - Retired in 2004 at age 54

Post by tc101 »

I stopped by the bank this morning as several people had suggested. I talked to someone there who verified that the check had cleared, talked to the branch manager and got the funds released. So I got good service once I went into the bank.

The problem is that I couldn't get that same level of service on the phone. On the phone I was in voice mail and hold for 5 minutes, then talked to someone who didn't seem very smart or friendly or helpful and was told there was nothing I could do.

I notice that on the phone I get much better service from places like Vanguard, Fidelity, Ing and Schwab. The brick and mortar banks are fine when you walk into them, but their phone service is really pretty bad.
User avatar
Dale_G
Posts: 3386
Joined: Tue Feb 20, 2007 5:43 pm
Location: Central Florida - on the grown up side of 83

Post by Dale_G »

I hate long holds. I get a yearly check from Fido for a non-qualified account. It is out-of-state, so B of A put a 10 day hold on it. I am able to check the Fido account and could see the issue and "clear date". The check "cleared" in 2 business days, but B of A held for the full 10 business days.

I added a Regions Bank account, I'll see if they pay more attention to the fact that the check has been "paid".

I also have a gripe with Fido. They consistently debit the account on Tuesday, but they issue the check on Thursday and mail it on Friday. I hope the funds rather than the management company enjoys the float.

Dale
Volatility is my friend
Post Reply