When you deposit a check into your bank account, when will the funds be available? This will depend on several factors, from the deposit amount to your bank’s internal policies. However, all banks within the United States must follow the rules of the Expedited Funds Availability Act. What do these funds availability regulations mean for you? Here’s what you need to know.
Expedited Funds Availability Act explained
The Expedited Funds Availability Act, or EFAA, is a federal law enacted by the US Congress in 1987. The EFAA was designed to regulate deposit holds, spelling out how and when commercial banks can use these hold periods. The funds availability regulations will depend on the type of account as well as the deposit amount. It ensures that there’s some uniformity between commercial banks so that customers know when their deposits and checks will be available.
What is the purpose of the EFAA?
One of the primary goals of the EFAA is to ensure that customers are informed of commercial bank policies in relation to deposit holds. If there are any changes to bank policy, the customers must be informed accordingly. These rules also applied to Federal Reserve funds availability as part of fractional reserve banking in addition to individual customer accounts.
When making a deposit to any commercial bank, the Expedited Funds Availability Act defines the rules surrounding when you’re able to access funds. During hold periods, customers have limited or restricted access to their funds. The EFAA’s purpose is to make the reasoning and timeframe for these hold periods clear.
Hold types under EFAA
Under EFAA rules, banks can place four types of holds on funds that have been deposited. These include:
Statutory holds are mandated by individual states and often apply to insurance company deposits. However, statutory holds are placed on nearly all deposit types in addition to insurance funds. With this common hold type, banks are required under EFAA rules to:
Make $200 available the first working day after a deposit
Make $600 available the second working day after a deposit
Make the remainder available on the third working day
This ensures that the full balance is available on the third working day after you’ve made your deposit.
2. Large deposit
If you’ve made a deposit with a total greater than $5,000, the large deposit hold rules will apply. In this case, the availability rules are the same as for a statutory hold on the first and second business days. On the third business day, the bank must make $4,800 available. The bank then has until the seventh business day after the deposit has been made to provide the full deposit.
3. New account
What happens when you open a new account? There are EFAA rules for new account holds as well, which apply to deposits made during the first 30 days after opening an account. The bank can hold onto your funds for up to nine working days following your initial deposit into a new account. However, there are also rules that apply for new accounts opened by customers who already have existing accounts. If you’ve previously opened an account in the past, you have 30 days to open an additional account without it being considered “new.”
The fourth and final type of hold is an exception hold, which is applied in more unusual or specific cases. For example, if the account is frequently overdrawn or there is reason to doubt the legitimacy of a deposit, an exception hold might apply. It’s possible to have a large deposit exception hold if the size of your deposit warrants additional investigation. In any case, exception holds are lifted by the financial institution after seven business days.
The bottom line
It’s certainly possible for deposits to fall under more than one category, in which case banks will usually choose the option with the lengthiest hold period. From standard statutory holds to large deposit exception holds, it’s important to understand how these funds availability regulations work. This ensures that your money is available when you wish to access it, helping better plan and manage your cash flow.
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