Why Do Banks Hold Funds?

You may have experienced a scenario where—depending on how you’ve made a deposit—you’re either able to access those funds right away, or there’s a delay before you can get your hands on your own money. These seemingly random hold periods can beg the question, “If my money is my money, why can’t I tap into it right away?”

It’s a valid question—let’s unpack it.

What is a hold period?

When you deposit money into your account, the bank needs to verify that the money is in fact real. This process takes time, and is often referred to as a “hold period.” To ensure your funds are valid, a hold is put in place to prevent you from spending money you may not actually have.

Do all banks place holds on deposits?

It likely won’t come as a surprise that the Canadian banking industry is highly regulated, not only by the federal government, but also internally by the financial institutions themselves. When it comes to handling your money on your behalf, banks have strict guidelines in place to protect both your and their assets.

Under the regulations outlined in the Bank Act, all Canadian banks can place a hold on your money up to a reasonable, predefined period of time. Depending on the relationship you have with your bank, some banks may choose to release your money sooner.

When does a hold apply?

It depends on your bank and how you deposit your money. There are multiple ways to deposit funds into a bank account, depending on where you bank. You can physically deposit cash through an ATM or by teller at a bank branch. These days, many banks also offer the convenient option to deposit funds electronically.

Here at EQ Bank, we’ve made banking easier by going fully digital, so you can deposit funds straight from your browser or mobile app. That way you can bank when you want from where you want—eliminating the need for branch or ATM pit stops.

As an online bank, the three main ways you can deposit money with us are:

-Interac e-Transfer^®

-Electronic Funds Transfer (EFT) through your linked accounts

-Mobile Cheque Deposit

Hot tip! Your direct deposits are generally not subject to hold periods. Another way to avoid having a hold placed on your funds is by using Interac e-Transfer—a quick and easy way to send money to another person or to yourself, as the funds typically arrive within 30 minutes. However, one downside of Interac e-Transfer is you can only move smaller amounts of money. For example, when you send an Interac e-Transfer from an EQ Bank account, your daily transfer limit is $3,000.

If you need to move larger amounts of money, however, your options are either an EFT or Mobile Cheque Deposit, but a hold period applies to both.

An EFT is another easy way to move money between all your personal bank accounts, provided they’re linked to your EQ Bank account. You can’t link another person's bank account to your own account.

Our mobile app offers a cheque deposit feature that allows you to deposit money to your account by taking a photo of the cheque. Similar to when you deposit a cheque at a bank branch or through ATM, the cheque must be addressed in your name in order for the money to be accepted.

How does the hold period work?

Every bank has a hold funds policy, so be sure to consult it no matter where you bank.

According to the hold policy at EQ Bank, we generally place a hold on funds deposited by cheque or Electronic Funds Transfer (EFT) for five business days, beginning after the date of deposit—meaning those funds actually become available by the sixth business day, when you include the date of deposit.

So, for example, if you make a deposit on a Monday, you can access the funds on the following Tuesday. Your money does, however, continue to earn interest with us while the funds are on hold.

How do hold periods affect my everyday banking?

In general, if you want to deposit money as part of your regular savings routine, where your money will simply sit and earn interest, hold periods won't have much of an impact on your day-to-day banking.

It's important, though, to be aware of when you think you may need money to pay a bill or pay back a friend, for example, before depositing via cheque or EFT. If your money is on hold while a due date passes, you may be subject to late fees (and angry friends) on the other end.

But, hey, we get it, sometimes we need money, like, yesterday. If you need immediate access to the funds you wish to deposit, you can avoid the hold period on amounts under $1,500 by transferring your money via Interac e-Transfer.

At the end of the day, hold periods are there to protect you, as well as the financial institution with whom you choose to bank. So go ahead and get familiar with your bank’s hold policy, and it’s smooth banking from there.