What Is an Account Hold?
An account hold restricts an account holder from accessing funds. When a financial institution places an account on hold, it may do so to protect the customer and the bank from a potential loss. A hold may last a few days, but its duration depends on the reason.
Key Takeaways
- A hold prevents access to an account or restricts some transactions from occurring in the account.
- A deposit of a large check, an out-of-state check, or a foreign check may trigger an account hold.
- A hold may occur when there is suspicious activity detected on the account.
Reasons for an Account Hold
- A deposit of a large check, an out-of-state check, or a foreign check may trigger an account hold.
- New accounts are typically subject to holds on initial deposits.
- Funds pledged as collateral for a loan may be temporarily placed on hold
- A bank may temporarily block the use of funds to investigate suspicious activity or identity theft.
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Account Hold vs. Account Freeze
An account hold is similar to an account freeze, where a financial institution prevents specific activity on an account. A hold is commonly a temporary delay in making funds available, like when a check is deposited. The bank delays access to the money, even though those funds appear in the account.
Account freezes prevent transactions from going through on a bank or brokerage account. Account freezes can be put in place by an account holder in the event of a lost or stolen debit card or by the bank or regulatory authority when suspicious activity occurs on the account.
What Determines the Length of the Account Hold?
The length of the hold depends on the reason. In the case of an unfamiliar source check, the hold can be one or several days. A check drawn from the U.S. Treasury would clear the next day, but a check from a bank outside the country may require several days to clear.
Are Account Holds Regulated?
The Expedited Funds Availability Act (EFAA) of the Federal Reserve Board's Regulation CC addresses the issue of delayed availability of funds by banks. All banks must disclose their funds-availability policies to their customers.
Are Holds Placed on Accounts for Criminal Activity?
A government or regulatory authoritycan prevent access to funds because of suspicious activity, suspected criminal activity, civil actions, orliensfiled against the account.
The Bottom Line
An account hold prevents access or restricts transactions from occurring. The Expedited Funds Availability Act requires banks to disclose their hold policies. A deposit of an out-of-state check or suspicious activity may trigger an account hold.
