Understanding funds on hold

If you've ever found your hard-earned money sitting in your bank account but inaccessible, you’ve likely encountered funds on hold. This can happen for various reasons, often tied to your bank account or payment processor’s policies. Whether it’s a deposit hold or an issue with available funds, understanding why this happens and how to address it can save you a lot of stress. Let's explore the reasons behind account holds, how to manage them and best practices for ensuring your money is accessible when you need it.

Why funds get placed on hold

Funds on hold are typically placed as a result of fraud prevention measures, risk assessment protocols, and sometimes, payment processing rules. Payment processors and financial institutions have specific guidelines for holding funds, especially when they involve large deposits or high-risk transactions. 

Here are some common reasons for funds on hold:

• Fraud prevention and risk assessment: Banks and financial institutions use various tools to assess the risk of each transaction and detect potential digital payment fraud. Deposited funds from sources considered suspicious, such as a new bank account or large deposits, may be flagged and placed on hold. This is particularly common in cases where the transaction raises questions about the account holder’s identity or transaction patterns.
• Chargebacks and disputes: If there’s a pending transaction or a dispute about the transaction, funds may be placed on hold until the situation is resolved. Payment processors may put a hold on your funds to protect against potential chargebacks.
• Compliance factors: Sometimes, funds on hold are related to compliance with financial regulations. The Federal Reserve or the Expedited Funds Availability Act, for example, make sure that funds availability is granted following specific guidelines. This is to ensure that check deposits, checks and other payments meet the necessary criteria before the funds are released.

Preventing and resolving funds on hold: 5 best practices

Now that you know why funds can be placed on hold, let’s talk about how to avoid it. Below are five best practices that will help ensure funds availability and prevent unnecessary deposit holds in the future.

1. Maintain transparent transaction records

Keeping accurate and transparent records for each transaction can help prevent any issues when it comes to funds on hold. Regularly update your account information and ensure your checking account or savings account is properly linked to your merchant account.

Financial institutions and payment processors may place a hold on deposited funds if they cannot verify the source of the payment. By keeping detailed records, you can speed up the release of held funds and ensure smoother transactions.

2. Communicate clearly with customers

Good communication is key to avoiding account holds. Inform your customers about any potential issues that could cause a hold on their deposited check or online banking transactions. Be transparent about payment methods and let them know if any additional documentation is required to prevent delays.

3. Implement strong fraud prevention measures

Make sure your payment processing system is secure and your merchant account is protected from fraud. Using encryption and two-factor authentication can help protect against fraud and reduce the likelihood of your funds being held due to suspicious activity.

Invest in payment processors and POS systems that have built-in fraud prevention features. This ensures smoother transactions and fewer instances of deposit holds.

4. Stay compliant with platform policies

Each platform, whether it's your merchant account provider or a third-party payment processor, will have its own rules and regulations about funds availability. Familiarize yourself with the funds availability policies and ensure that you comply with all requirements. This will help you avoid account holds and speed up the release of your deposited funds.

5. Keep a financial buffer

Sometimes, funds on hold occur due to issues such as insufficient funds or unexpected delays. To avoid interruptions to your operations, it’s a good idea to keep a financial buffer in your checking account. This ensures that if some of your funds are temporarily held, you can still access the money you need for day-to-day operations.

Keeping extra funds in your savings account or setting up an automatic payment system can help you stay afloat during times when funds availability is delayed.

Tailored funding options, with Sekure Payment Experts

At Sekure, we understand how important quick access to funds is for your business. That’s why we offer customized funding options that can meet your specific needs. Whether you need funds deposited the next day or the same day, we’ve got you covered.

Next day funding

Your default funding option deposits your money into your bank account the very next business day. Transactions processed and closed by 10:00 PM ET will be available the following business day, Monday through Friday. If you process transactions over the weekend, your deposited funds will be available on Monday.

Same day funding

For businesses that need funds urgently, we offer same-day funding. Transactions processed and closed by 10:30 AM ET are eligible for a same-day deposit, ensuring you don’t have to wait long to access your available balance.

Sekure Payment Experts makes funding simple and fast. Don’t let cash flow slow you down — explore deposit solutions that fit your business today.