Understanding a Bank’s Hold Policy

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Understanding a Bank’s Hold Policy


on February 10, 2010

This post is the second in the banking series.

A financial institution’s policy of holding funds is often a source of customer complaints because the rules and reasons are often poorly understood.

New accounts of all kinds are usually subject to the institution’s hold funds policy unless you are a well established client. The bank will prevent access to most Canadian cheque deposits for at least 3 days and up to as much as 7 days. A teller obviously won’t put a hold on a cash deposit but he or she will put a hold on a deposit containing cheques. This means that if you deposit cheques with a teller or anything with an automated banking machine (ABM), you will not have access to the funds for a least 3 days. Cash deposited through an ABM will be held because the machine has no way of verifying that the envelope actually contains anything.

The bank does this to protect itself against fraud by new account holders. This allows cheques that have been deposited time to clear through the payment system. Any forged or fraudulent cheques that were deposited will usually charge back to the depositor’s account during the hold period and bank staff will be alerted to the activity.

Cheques drawn on foreign banks will have very long hold periods (U.S. cheques are held for about 30 days) because the payment clearing system between countries is often very slow. Foreign currency cheques drawn on Canadian banks will have longer hold periods as well, from 10 to 20 days.

Clients who have established a relationship with their financial institution may have their hold limits increased. For example, a long time client may have the first $5,000 of a deposit available to him but any deposit in excess of this amount will be held. This gives the client instant access to his funds but limits a potential fraud to $5,000.

Bouncing too many cheques or other suspicions activity will result in the bank putting a “hold all funds” back in place. This is one good reason among many to keep track of your account balance to make sure you have the funds available before writing a cheque.

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