ASK KIM
Avoid Long Holds on Your Deposits
by Kimberly Lankford

On January 19 I deposited a $12,000 check I drew on my Vanguard Prime Money Market Fund to my checking account with my local bank. My bank put a hold on the deposit for $7,000 (the remaining $5,000 was made available) until February 2. Other than verbally jumping up and down and threatening to close my account, which convinced them to release the hold, what is my best recourse to stop this practice?

To avoid running into these kinds of long hold times, try depositing a cashier's check in person, which the bank must make available the next business day, or make a direct wire transfer, which makes the money available immediately.

You may need to pay a small fee for a wire transfer, but it is often waived if you are moving large amounts of cash. Vanguard, for example, charges $5 for outbound wire transfers of less than $5,000 but waives the fee for larger transfers. Some banks may charge a fee to receive the money as well.

Your bank's timing was exactly within the Federal Reserve's rules for funds availability. Even though the new Check 21 rules decreased the time it takes for checks you write to be deducted from your account, they haven't changed the amount of time that banks are allowed to put a hold on checks you deposit.

Banks can generally put a hold on checks from banks in their local check-processing region for up to two business days after you make the deposit, and the hold can extend for up to five business days if the other bank isn't local.

These timeframes can stretch even longer for checks worth more than $5,000. In that case, the bank must make the first $5,000 available under their regular rules, but can hold the rest of the money for up to seven business days for local checks, or up to 11 business days for checks from nonlocal banks.

See the Federal Reserve's Applying Funds Availability Rules page for more details about how long the hold times can last.

Remember, though, that these are the maximum hold times. Many banks will make your money available earlier -- especially if you ask them to shorten the hold and have a long history with the bank, as you discovered.