It’s payday! Finally! You get your very first paycheque, log into your online banking and click on the mobile deposit feature. A message pops up saying that there will be a 4 day hold placed on your funds. Really? On my paycheque?? What if I have rent to pay? Food to buy? Is there any way I can get my money now? It’s frustrating to have hold funds placed on your cheque but in many cases you can access your money sooner or avoid hold funds completely.
Why the Bank Places a Hold Funds
When you deposit any negotiable item like a cheque, bank draft, or money order, the bank has to wait for it to be processed. This can take a few days or a week or longer, depending on the item. What are they waiting for? The bank is making sure there is money in the account the item is drawn on, that there are no stops, and that it’s actually a valid item.
The banks are not trying to make you miserable by holding your money. Unfortunately, people do bad things. They write cheques when there is no money in the account (NSF). Items are stolen and forged, and they are altered for different amounts than the original item. So the banks try to protect themselves by placing holds. They are also protecting you. If you deposit an item and it gets returned it will be ‘charged back’ to your account. This can cause your account to become overdrawn which can cost you a lot of money. My post about Overdraft Protection can help you avoid this. Even paycheques can get returned. My daughter learned this the hard way from her first job at 16 years old when her very first one was returned!
When Can You Have Access to Your Money?
There are rules about how long the bank holds your money. If you want all the nitty gritty details and rules read the article Cashing a Cheque. Basically, the length of the hold depends on the status of your account and what type of item you are depositing; that is whether it is in province, out of province or out of country. If you deposit at an ATM or with your online app the hold will be based on your debit card limit. Make sure you pay attention to the hold period! And be aware that the number of days for the hold is Business Days.
An example of a 4 day hold:
You deposit your cheque in the ATM on Thursday just before a long weekend. A message on the screen advises you a 4 day hold will apply. That means your funds will be held for Thursday and Friday which is two business days; Saturday, Sunday, and Monday are all holidays so now the next business day is the following Tuesday. Wednesday is the fourth business day so you will not have access to your money until after the fourth business day which is Thursday. In this case a four day hold has turned into a whole week!
Canadian Banks are required to give you access to $100 as long as you have an account in good standing and they believe the cheque is legitimate. They are also not allowed to place holds on Government of Canada cheques payable to individuals up to $1500.00. There are a few exceptions which are outlined in Cashing a Cheque?
How to Avoid Hold Funds
The best way is not to accept cheques or other negotiable items! With technology today even a small company with 5 employees can sign up for online business banking and have a platform to direct deposit pay. And it’s less expensive than issuing cheques. So always ask for direct deposit and you will have instant access to your funds. Not to mention that it is so much more convenient. If you’re getting money from a friend or relative, e-transfers are the way to go. Any work that you do online should be paid by a secure method like PayPal. If a company is going to be sending a cheque, you may want to investigate how legitimate they are.
But, if you have to accept a cheque from your employer or anyone else here are a few tips.
- Check your debit card to determine what the transaction limits are for deposits and holds. For example, if your cheque is for $900 and your deposit with no hold limit is $1000 then you can deposit at the ATM or by mobile deposit and no funds will be held. However, if it’s for $1500, then $500 will be held. For more information read Why your Debit Card Limit Matters.
- Talk to a banking representative if you need access to funds. If you check your debit card limit and you know that funds are going to be held, don’t deposit it by mobile or ATM! If you do this, it’s going to take longer to get your hold removed. Instead, go into a branch if possible. It’s a lot quicker if they can see the item you are depositing. They won’t always be able to remove the entire hold, but may give you access to some of the funds. Once you deposit the same paycheque a few times they can do a quick check of past deposits and you will have your money right away. If you can’t get into a branch, call the bank’s customer service number and ask to get your debit card limit upgraded.
- Establish a good relationship with your bank. This means that you have a bank account with regular transactions processed through it and there are no issues with NSF cheques, late payments, or items returned that you have deposited. The longer the history of ‘good conduct’ the better. Also, loyalty counts! You don’t need to have all of your business with one bank, but you won’t have an issue with holds or restricted debit card limits if you have your accounts, loans, and investments with the same bank.
Still not able to get your money? Try opening an account where your employer banks. If you deal at the RBC and the cheque you’re depositing is drawn on the CIBC, the RBC is not able to verify it. The CIBC can verify the cheque since it’s drawn on their bank. You will want to make sure they will do this for you before you take the time to open a new account so be up front about why you are opening the account. If they agree not to hold, make sure the person opening the account places a notation on your file to confirm funds can be released for your paycheque.
And finally, if none of the above works, try and get help from a friend, family member, or even your employer. Banks will negotiate a third party cheque for a customer in good standing. So if dad has an established account with TD bank, you can go there with him and sign over your cheque. He can then deposit it and give you the funds. It’s not an ideal solution but at least you’ll get your money right away.
Unfortunately, there will be times when a hold will not be removed. It means the bank is unable to verify the item or has concerns about it. I know it’s frustrating, but if the item is returned and you have already spent the money it can be all kinds of hassle for you. If you take all the steps above, you can usually avoid a hold funds.
Do you have more questions about holds?
I welcome your comments and questions, and please share this if you have found the information helpful.