Many people put unfailing trust in their banks. Banks still invoke images of vaults of gold, available on demand for customers to draw on as necessary. But does that theory still hold true in the day of online and electronic banking? Can a bank legally refuse to give you your money?

A bank can legally refuse to give you your money for a deposit. For checks and wire transfers, most banks have a holding period of between two to five business days. During this time, funds are unavailable while the transaction is being authenticated.

Once the funds have been validated the bank no longer has a legal right to deny you your funds. However, as with everything financially related, the matter is not necessarily black and white. Keep reading for everything there is to know about when banks can refuse you your money!

Can a Bank Really Refuse to Give You Your Money?

Yes, a bank can refuse to give you your money – to a certain extent.

When you deposit a check or have funds electronically wired to you, most banks will initiate a holding period. Typically, this period is between two to five days–during which they verify the funds from the paying bank. This is done to protect all parties involved from having to pay any bounced checks or overdraft fees.

It also gives the bank a chance to investigate suspected fraud.

Once the holding period lapses, however, and the funds have been verified, the bank no longer has a legal right to withhold your funds. 

What is a Bank Hold and Why Might Your Bank Place One on Your Funds?

A bank hold is a processing period in which a bank recognizes your claim to funds. Unfortunately, the bank does not release the funds to you until they validate the authenticity of a transaction.

In many cases, a bank hold protects the payor. If the payor sees that someone is making an unauthorized deposit against their account, the hold allows them to contact their bank and cancel the transaction prior to funds clearing. After funds clear, it can be extremely difficult to get money back.

However, holds also protect the payee. While in holding, your bank will contact the payor’s bank to see if there are sufficient funds to cover the transaction. In some cases, the payee may be required to pay bounced check fees. The holding period can actually help you avoid this hassle by cancelling the transaction if insufficient funds are detected.

What can Trigger a Bank Hold?

Although all check deposits and wire transactions trigger a bank hold, most holds will be released in the minimum amount of time per your bank’s policy. Some conditions that may trigger a longer hold include:

  • Large deposits – the bank is required to report any deposit over $10,000 to the IRS, so this may result in some holding period delays
  • Frequent deposits – an influx of activity that is not consistent with your usual deposit activity
  • Any other suspicious indicators – modern banking technology is getting quite sophisticated, so if you try to deposit against a payor that seems suspicious or simply not in line with the type of accounts you usually deposit against, it may trigger a longer hold

While the bank is within its rights to place a hold on your account, it must make at least $225 of the deposit available for cash or check writing by the next day. For unusually large deposits that get tied up in an extended hold, the first $5,525 must be made available. Make sure to check with your bank for its hold policies.

How Can You Get Your Money Released from the Bank’s Hold Early?

If you are in a pinch and simply cannot wait for your funds to get released, you can expedite the process:

  • Contact the payor – if you feel like the hold is being caused due to waiting for authentication from the paying bank, you can try to contact the payor and see if they will greenlight the transaction with their bank
  • Request a cashier’s check – this is a great option for those expecting to receive a huge deposit. A cashier’s check is guaranteed prior to the transaction and effectively works as cash upon deposit
  • Direct deposit – this is the best way to receive your paycheck in a timely manner in 2022, as most employers are immediately authenticated by your bank. In addition, there are numerous banks that are now offering direct deposit a day early for added convenience

One final method for avoiding holds is to use the old cash deposit trick. This is good for smaller checks or when a cashier’s check is not an option.

Say you receive a paper check, and you need the funds from that check to electronically pay a bill that is due today. In this case, you don’t have time to wait for the check to clear.

Instead of depositing the check in your account, go to your bank and cash the check. Then, take the cash you receive and deposit it into your account. Cash deposits are available instantly for most banks on the next business day at the latest. This is a nifty little trick to get your funds in a hurry if you need them!

What are Your Legal Rights if a Bank Refuses to Release Your Funds?

If your funds have been authenticated and your bank still is not releasing them to you, then you can absolutely sue to receive your funds. 

However, as is the case with most matters related to litigation, this is not a straightforward process. This can often result in further dissatisfaction on your part and hit you in the wallet as well.

First of all, it is costly and time-consuming. You really have to ask yourself if the amount you are suing for is worth the hassle. If it’s to try and fix a broken credit score, then maybe. But if it’s to retrieve an amount that caused you to miss on a down payment on a used car, probably not.

In addition, there is a good chance that you did not read the fine print of the paperwork. Many of these forms with your bank actually state that all disputes must be solved via arbitration. While arbitration can help you get what you have coming to you, you invariably give up a little control as you concede to the arbiter’s judgment. 

Finally, there can be a clause in your banking agreement that says they can use a deposit to cover other debts. For example, if you have a credit card with them and have not been making payments per your agreement, your bank may have a legal right to keep the funds you deposit and apply them elsewhere, leaving you with little recourse when you immediately need that money for something else.

The Verdict: Can a Bank Refuse to Give You Your Money?

Banks can refuse you your money during the first two to five business days while transfers are being authenticated. After that, they no longer have legal recourse to deny you your funds. Nonetheless, there are some extenuating circumstances that may be considered exceptions. ake sure to read the in-depth breakdown listed above to find out all of the ins and outs of when a bank can legally refuse you your money. 

Thanks for taking the time to read this, we hope you learned a thing or two!

Geek, out.

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