Definition
The Expedited Funds Availability Act (EFAA), enacted by the U.S. Congress in 1987, is a law that governs the amount of time banks can hold deposits and specifies the conditions under which deposits, such as checks, must be made available for withdrawal. It aims to expedite the availability of funds while providing a standard set of hold periods based on deposit type, account type, and other factors.
| Hold Type | Description |
|---|---|
| Statutory Hold | Maximum time limit a bank can hold funds (usually for most checks). |
| Large Deposit Hold | Specific provisions for large check deposits that allow longer hold times. |
| New Account Hold | Holds for funds deposited into newly opened accounts to mitigate risk. |
| Exception Hold | Circumstantial holds based on certain conditions deemed unusual. |
Examples
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Example of Statutory Hold: If you deposit a personal check of less than $5,000, most banks will generally make the first $200 available immediately, with the rest available within two business days.
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New Account Hold: If a new customer opens an account and deposits a check of $1,000, the bank may withhold access to the check amount for up to 9 business days to ensure the check clears properly.
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Large Deposit Hold: A deposit of $10,000 or more might face longer hold periods, often 7-11 business days, as the bank assesses risk and clearance.
Related Terms
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Check Clearing: The process by which a bank verifies that a check can be paid, allowing funds to move from the payer to the payee.
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Funds Availability Policy: A bank’s statement outlining how long it will hold deposits until funds can be accessed.
Illustrative Diagram in Mermaid format
flowchart TD
A[Deposit Made] --> B{Deposit Type}
B -->|Personal Check| C[Statutory Hold]
B -->|Large Check| D[Large Deposit Hold]
B -->|New Account| E[New Account Hold]
B -->|Unusual Circumstance| F[Exception Hold]
Humorous Insights and Quotes
- “Why did the bank teller break up with her boyfriend? She lost interest!” 💔
- Fun Fact: The EFAA was part of a greater effort to improve efficiency in the banking sector—kind of like an express lane for your money, minus the hot dogs.
Frequently Asked Questions
What is the purpose of the EFAA?
The EFAA regulates how quickly you can access the money you’ve deposited in your bank account, ensuring a standard experience across banks.
How long can banks hold checks?
It depends on the type of check and circumstances, but standard holds can be from 1 to 11 business days depending on the factors we discussed above.
Can I fight a hold?
You can certainly inquire with your bank about holds, especially if you believe they are unwarranted. However, banks usually base holds on federal regulations.
References for Further Studies
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Books:
- Understanding Banking Law by William A. Drennan
- Federal Reserve System: A Very Short Introduction by Kevin H. H. Sun
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Online Resources:
Test Your Knowledge: EFAA Fun Fact Quiz
Remember, a well-informed investor is a happy investor! So go forth and conquer those holds like a seasoned pro! 🏦💸
