I want my two dollars!

June 6, 2008 8:18 PM

Finance-filter: why does my bank take so long to make my deposits available to draw from?

I can't make sense of the way banks hold on to my money and don't make it available to me for much longer than seems necessary. Electronic transfers ought to take nanoseconds ... and when I make a transfer from BankA to BankB, the deduction from BankA is immediate. However, an entire week can pass before BankB lists the funds as part of my "available balance." They may be listed before then as part of my "collected balance" and as part of my "current balance," but if I tried to use those funds I'd be charged overdraft fees.

This happens whether it's an electronic transfer across banks or within one bank, or whether I deposit cash, personal checks, or even USPS money orders. The only thing that seems to be available right away is employer direct deposit.

I can understand the bank wanting to hold that money overnight to make a quick buck in interest, or in the case of personal checks, give it time to clear, but otherwise it seems really excessive.

Can you guys explain to this English major (1) why guaranteed funds would need so long to clear & how banks justify keeping my money from me like this, and (2) the real difference between collected/current/available balance?

posted by headnsouth to work & money (9 comments total)

Short answer: the funds don't "need" that much time to clear. The banks deliberately take the legally allowed time to let them clear, so they can earn interest off them while you wait.

At my bank, where I've maintained a good balance for years, with no bounced checks or any sort of problems, I finally just went in and told a representative that I would be expecting a lot more checks, and if the bank wasn't willing to see my good credit history and positive banking as a means of crediting them *immediately*, I would go to a different bank. They agreed to do this - now my money's available about one second after it's deposited / transferred / whatever. Their only caveat was that I deposit amounts over $10,000 at a teller, so they would know they were "kosher." No problem.

Banks discriminate against students and people with low balances or bad credit. Just talk to your bank and threaten to leave if they're not more responsive to this particular need. It worked for me.
posted by Dee Xtrovert at 8:30 PM on June 6, 2008

Banks make a lot of their money off of 'float' processing ie how long they can float your money -- they have use of your money, can loan it and/or make interest upon it. There are entire mainframe systems devoted to float processing -- this money gets three days float, that deposit gets two days, etc and etc. It's a fine racket. For them.
posted by dancestoblue at 8:33 PM on June 6, 2008

they follow the time periods set out in the statute, and reap the interest on the float in between
posted by caddis at 8:38 PM on June 6, 2008

Regulation CC is the applicable document, and the answers above are right. This type of thing is what pays for your free checking account.
posted by Rock Steady at 9:23 PM on June 6, 2008

This type of thing is what pays for your free checking account.

And is what makes it not, y'know, actually free.
posted by dersins at 10:05 PM on June 6, 2008 [1 favorite]

While it's true that Reg CC is the regulation that sets the rules for the maximum amount of time that a bank can take to clear your checks, banks are able to and do set their own time frames to operate within that reg. Many banks set shorter float schedules as a competitive measure, which is admittedly most effective when competing for commercial business, but can also apply to consumers as mentioned above. I believe we're currently on a "0,1,2" float schedule, which means "on-us" items clear same day, checks drawn "locally" (defined as MD, DC, VA, DE and WV - "local" in this sense means that they clear the same fed location as us) clear next day, and everything else is 2 days. These are all "banking days", and there are special rules for large dollar amounts.
posted by ersatzkat at 4:54 AM on June 7, 2008

OP here --- thanks for your responses.

Interestingly, today's mail brought a "notice of hold" from BankB that references Regulation CC --- they're going to hold on to more than $1k for EIGHT DAYS because of reason code 5n: paying bank will not guarantee funds. The "paying bank" in this case is the USPS and the funds are money orders that were bought with cash! How much more "guaranteed" can you get?! So I'll call them first thing Monday and growl at them about it. It's my money dammit.

I still would like someone to explain the lingo to me though, of what collected balance, current balance, and available balance mean.
posted by headnsouth at 8:20 AM on June 7, 2008

This is why I bank in person and not online. Refer a mortgage or two to the senior guy, and these delays, just like overdraft fees, and minimum balances, can magically go away.
posted by StickyCarpet at 8:22 AM on June 7, 2008

Did you deposit the USPS money orders in person? If you did, they're required to be available immediately.
posted by oaf at 11:45 AM on June 8, 2008