Bank holding part of a deposit
February 20, 2005 2:52 PM   Subscribe

Why would a bank hold part (less than half) of a deposited cheque for an entire week after the cheque has been deposited at a bank machine? It was a paycheque, not a personal cheque. I had to go to a branch and look annoyed at the teller to get him to release the hold on my money. And he couldn't explain why they were holding the funds.

Here are the facts:

This is a Canadian bank, Canadian funds, from another Canadian bank account.
I get paid weekly and I work part-time so the amounts aren't that huge. (We're talking under $200.)
This has happened a couple of times and it is a pretty major inconvenience, not to mention embarrassing. (I'll go to pay for something that costs, like, $10 using debit and then it comes up insufficient funds). Is there any way I can make my bank stop doing this?
I know depositing at the branch is an option, but I would like to be able to deposit my paycheque when I am actually paid.
posted by SoftRain to Work & Money (20 answers total) 1 user marked this as a favorite
Have you asked someone who works at your bank about this? That, or look in your terms of service documentation for anything that might be related, but I'd just go schedule an appointment with someone at the bank (not a teller) and get some details on exactly what this policy is. I've not heard of anything like it with my bank, but I'm in the U.S., and I rarely deposit checks at the ATM.

Does your employer offer direct deposit of your paycheck?
posted by odinsdream at 2:59 PM on February 20, 2005

I think you might be a suspected terrorist.
Honestly, I have no idea. Who you really might want to talk to is your employer. It sounds like they are the ones being scrutinized or coming up short.
posted by punkbitch at 3:04 PM on February 20, 2005

I've had this experience at two different Canadian banks (and at two branches of the one bank)

How long have you had the account? I remember when I opened a bank account five years ago, they told me that they would put a hold on any cheque deposited at a bank machine for five business days. When I asked about it a year or so later, (it was causing me inconvenience too), they said "oh, that should have been taken off your account a long time ago", and it was removed.

A few years earlier, with a different account at the same bank (but a different branch), they wouldn't do it, as my credit rating was newer. (I was barely out of college, had one credit card and didn't use it much).

I imagine different branches may tell you different things. Are you close to your home branch (where you opened the account)? Talking to someone there may help. Also, try speaking to a service representative via telephone banking. I've actually gotten really good service from these folks - and they're available more readily than a manager at an actual branch.

This is such a pain in the ass. I hope you sort this out. Canadian banks don't even want you to go to the branch to do stuff you can do at a bank machine (at least judging by their hours and the number of tellers they have when they are open), so why do they make it so difficult to bank by machine?
posted by melissa at 3:15 PM on February 20, 2005

When that has happened to me I had either developed a pattern of overdrawing my account or I had a new bank account. Only when I'd established a pattern of reliability with my checks did I get the full balance when depisited. The, on average, week's time it takes to clear a check still exists but banks have usually made up for it in recent years by giving you the balance of the check immediately in trust. I'm surprised the teller could actually give you the entire check just b/c you complained.
posted by scazza at 3:15 PM on February 20, 2005

My employer is a small business; there are 4 employees, so direct deposit isn't an option. I don't think the cost would justify it.
Also, I do a lot of the bookkeeping, so I know the money's there. Besides, my mom used to work at a bank, in a case like that they'd hold the entire cheque, not release most of it.
posted by SoftRain at 3:17 PM on February 20, 2005

ooh! A question I can actually help on!

I worked as a teller for four years at Scotiabank. How it works is this:

Your bank card has an limit called "cash back" that is determined by the brach when you open the account. Let's say for the sake of argument that this amount is $100. (most ATM cards are set automatically from $100 to $200)

This means that per week, anything you deposit into the bank machine over $100 is automatically held (because it is over your cash back rate).

The banks do this to cut down on fraud - say you were to deposit an empty envelope with no money in it, and say that you put in $800 (the max you can withdraw from most ATM's), with this system the bank would only lose $100 before they found out.

The next morning, the Teller's come in and open the envelopes, and compare what is contained in the envelope to what is on a printout of what people have input in the machine, and go through and put little R's beside the accounts that they want to take the hold off. The happens automatically if it is cash, or if the cheque is from that branch (and sometimes if the cheque is from that bank - i.e. Scotiabank cheque into a Scotiabank account) - but this is optional. They also automatically remove ATM holds for known customers.

To answer your question - if you have a low cashback rate, and the cheque is from a different bank (ie. Royal Bank cheque into Scotiabank account) and they don't know you, they are not going to remove the hold.

To fix this, you should go into the branch and speak to a service manager. Tell them that this is happening, bring in a cheque (that you would otherwise be putting in the ATM), and ask for your Cashback to be raised. Mine is set at $1000, but the amount you get will be determined by the amount of credit you have with the bank (ie if you have that bank's credit card) or if you have a lot of money. I have never seen a customer turned away when they do this.

Good luck!
posted by Quartermass at 3:40 PM on February 20, 2005 [1 favorite]

Mystery solved! Thanks.
posted by SoftRain at 3:51 PM on February 20, 2005

Quartermass' explanation notwithstanding, part of it is that some banks are just thieves.

I used to bank with the same bank my employer uses, and on payday I'd go by the drive-thru and deposit my paycheck. One fine day back around 1988 I went to the ATM the following Saturday and was unable to draw funds. We were living hand to mouth at the time, and it was not a laughing matter. The check was drawn on the same bank, it was flagrantly illegal for them to hold the funds.

I did the go-in and make-a-scene thing and was coolly told "that's our policy." Protests that their policy was ILLEGAL (which it was, and still is) were met with blank stares.

From that point on I made a point of going through the drive-thru and passing them my paycheck and ID to get cash, then placing the cash and depsit slip in the carrier as a second transaction. Several tellers fussed me for this but I explained to them that it was the only way to avoid their illegal funds-holding policy.

I eventually stopped banking with them, but they bought the next three banks I moved to in succession. When I moved to my current bank, after they bought the homestead where I was banking, there was a LONG line of people doing the same thing.
posted by localroger at 4:49 PM on February 20, 2005 [1 favorite]

They do this in the US too -- localroger is right that it seems like rank thievery, but it's actually legal. The banks know perfectly well that the money is in your account (they can now instantly shoot a digital image of the check across the country to verify that it's good). But they just hold onto your funds to rake in the interest for themselves as long as they can. It's a scam, but it's the law.

Add this to the lovely new law called Check 21, and what you have in the US is the situation whereby checks FROM your account clear with lightening speed, but checks TO your account languish for days, making billions, in the aggregate, for the banks.

Think this is a scam and want to do something about it? Well, too bad: Congress is in bed with the banking industry, and the feds are barring the states from doing anything to protect their own citizens from bad banks.

At any rate, this article (scroll down) gives a few suggestions for how to get around holds in the US.
posted by insideout at 6:45 PM on February 20, 2005 [1 favorite]

There was already a great answer,but I thought I share a problem I used to have. I often got different holds even at one branch, even with a line of credit, and a very long history with RBC. I had a particularly difficult time depositing cheques from the U.S.. But CIBC has CAD/USD ATMs, which don't hold the cheques for long.
posted by gesamtkunstwerk at 7:01 PM on February 20, 2005

Add this to the lovely new law called Check 21, and what you have in the US is the situation whereby checks FROM your account clear with lightening speed, but checks TO your account languish for days, making billions, in the aggregate, for the banks

Is there anything that will ever dispel this myth? Check 21 does not -- repeat does not -- make your checks act like your check card. Check 21 still uses the Federal Reserve to clear checks. You check card uses the Visa network and other card networks. Your checks will not clear on Sunday. Besides the fact, many merchants, credit card companies, etc, have been clearing checks electronically through the Automated Clearing House (ACH) for years, which is just about as fast as the mechanism Check 21 uses.

If you bank with BoA, Wachovia, SunTrust, Wells Fargo, or any number of other large banks, your checks have been clearing in exactly the way Check 21 wants them to be cleared for literally years through image-exchange networks.

There is nothing wrong with Check 21 per se, because it will keep the banking industry from coming to a screeching halt the way it did in 2001, because they dont need to fly trillions of bits of paper around the ccountry to pay your bills. What may need to change, and what should certainly be up for discussion, is how Regulation CC works, which is the law that tells banks the amount of time they can hold your money. Most banks do not use Reg CC to its limit by the way. If they did, any check that did not come from your Federal Reserve districct would be held for nine to eleven business days, which is the limit of the law. Besides the fact, if you are a good customer with a clean account, your funds will be available to you as soon as they were before (that is usually immediately) and if you have a very bad banking history, your funds will not be. Which they shouldn't be, because people who don't manage their accounts responsibly present a risk for fraud and loss.
posted by Medieval Maven at 7:44 PM on February 20, 2005 [1 favorite]

I didn't say Check 21 made your paper checks into a debit card. The massive unfairness is that Check 21 allows the use of technology to speed up the money LEAVING your account, but fails require that banks use technology to speed up the money getting INTO your account. This has nothing to do with how "clean" your account is--if they know the check is good, you should be able to have the funds immediately. Scam. Legal, but a scam. Agreed that the major banks have already been doing this, but to put it into a blanket federal law is another slap in the face of consumers' rights.
posted by insideout at 8:06 PM on February 20, 2005

part of it is that some banks are just thieves.

Correction: all banks are thieves. Holding back transfers and the like for only one day can net them millions, if not billions, by increasing their interest gains (on their investments) and decreasing their interest costs (on your savings).

If they're doing something, you can pretty much rest assured they're not doing it to benefit you.
posted by five fresh fish at 8:10 PM on February 20, 2005

This is why I will never have a bank account. If I win the lottery I will hire a fucking armored truck to follow me around. After having a teller overpay me when cashing a paycheck (by $24, which I didn't notice) and then, without contacting me, call my employer and ask them to dock my pay — and this in addition to a variety of other indignities, such as Bank of America refusing to close my $0-balance account so they could keep billing me for the monthly fee, and a drunk bank teller in a bar telling me the status and approximate balance of my ex-girlfriend's account — this corrupt, degenerate, useless, parasitic industry will never see one fucking dime of mine. If my landlords stop accepting money orders I'll live in a cardboard box. Banks are thieves, liars, thugs, racketeers, and con-artists.

This refusal to honor checks which are known to be good in a timely fashion is merely another instance of this. It amazes me that the average citizen is willing to be treated like this. If banks were held to anything like the same standard of service as any other industry, we would have a very different financial system.
posted by IshmaelGraves at 9:02 PM on February 20, 2005

Just to support the idea that banks make money holding your funds for a day: I worked as a temp for a unit of a California bank called "safe keeping". All we did was manage huge deposits in "safe keeping accounts" over night, which paid interest.

It is interesting to point out, at least in the 80's, there was law in New York that required employers to make paychecks immediatly cashable. Usually done with a special card usable at a specific location. Typically this was a bank with a special window. I could cash my paycheck but not deposit the funds (even though it was my bank).

I had fun throwing a successful fit at my branch one day when I complained the cash I deposited in the ATM (having cashed my check) wasn't available. They had some problem which delayed them going through the ATM deposits. I told them that was THEIR problem, not mine, and suggested they open the damn bags NOW and get MY MONEY. (I always throw such fits so other customers can here. A trick echoed in Heinlein's "To Sail Beyond the Sunset", published later than my experience. The underlying attitude I did learn from Heinlein )
posted by Goofyy at 10:00 PM on February 20, 2005

Unless the check is "on us" ( a BoA check into a BoA account) how are we supposed to "know" that it's good? I'm fascinated by the idea that we're supposed to "know" that a check is good. Local checks (drawn your fed distrcit - first two of your routing number must be the same) are w/in two business days, again usually faster. Any type of electronic funds are available on the day of deposit. Cash and government checks, including USPS money orders, likewise. In my experience, banks do not use regulation CC to its fullest extent. The reg requires that the banks do not exceed the hold times listed, and nine out of ten banks make most funds available damn near immediately, anyway, and just deduct the hell out of your account when a check comes back bad.

Just so we're straight here -- Check 21 is not a problem. It's actcually a fairly decent solution to a stupid logistcial situation. If you want to write to your Congressman, you should be talking about the availabilty regs (Reg CC). No one will rescind Check 21, because Sept 11 showed the country how completely dependent banking is on slips of paper being carted around the country like Vegas markers.
posted by Medieval Maven at 4:35 AM on February 21, 2005

I strongly recommend taking your money out of banks and putting it in a credit union. You'll be much happier.
posted by Kirth Gerson at 5:17 AM on February 21, 2005

Thanks for such a thorough answer Quartermass. I found it really helpful. Now I'll know exactly what terminology to use if I run into this problem again.
posted by melissa at 7:45 AM on February 21, 2005

Unless the check is "on us" ( a BoA check into a BoA account) how are we supposed to "know" that it's good? I'm fascinated by the idea that we're supposed to "know" that a check is good.

MM, I've heard many stories of banks holding paychecks for days even if the employee's bank is the *same* as the employer's. The point is that banks have the discretion to hold the checks (as you have noted yourself); to think that they aren't doing so in order to increase their profits at the expense of consumers is naive. BOA knows the check is "good" before they release the funds precisely because Check 21 technology lets them know it's good. It's not that Check 21 technology is evil; it's that it's primarily being used to benefit the banks right now.
posted by insideout at 9:07 AM on February 21, 2005

softrain, can you email me?
posted by CunningLinguist at 5:54 AM on February 25, 2005

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