Cheque Hold

Any time you deposit a cheque with your Canadian banking institution, it may put the cheque funds on hold for a fixed period of time, during which you will not be able to access them. The bank will use this time to verify that there is enough money in the payer’s account to cover the cheque. The bank will also check if the payer hasn’t meanwhile requested a stop payment on it. How long the hold period will last and whether it will apply in the first place depends on the particular bank’s cheque holding policy. In principle, this is the maximum number of days during which a banking institution can legal hold the money from a deposited cheque. After this period is over, the funds should be credited to the account of the person or entity that made the deposit. The holding period is usually equal to the number of days it will take for cheques to go through the clearing cycle of the bank.

The Canadian Imperial Bank of Commerce, for example, imposes the following rules:

– If you deposit a cheque in Canadian dollars issued by a bank in Canada, you will normally have to wait 5 to 7 business days before you can use the money;
– If the cheque you present is in a currency other than the loonie but is still issued by a Canadian branch, the holding period is between 10 and 20 days;
– If you deposit a non-Canadian dollar cheque issued abroad, you will wait for it to be cleared between 15 and 30 days.

The cheque holding policies of the other Canadian banks require similar waiting periods. Yet, to avoid any unpleasant surprises, make sure you call your bank or visit its website to inquire about the exact terms which it stipulates. Usually, banks consider cheques to be of local origin if they were deposited within the same cheque processing region as the banking institution where the cheque was drawn.

Sometimes, even after the holding period is over, you may not be able to use the cheque money. There may be several reasons for this, one of the most common being that the cheque issuer has requested a stop payment on the cheque. In addition, financial institutions may treat differently cheques deposited under emergency conditions and those of uncertain origin, which the bank may not be able to collect. Banks may also treat differently clients with prior histories of overdrawing as well as new clients. Emergency situations, such as cheques deposited at banks that have lost their computer systems, are also in this category.

The stop payment is a written request that any payer can file with their bank. It serves to cancel the payment of a pre-authorized debit or a cheque. In other words, the bank will not honor the cheque’s payment after it is delivered but before being cashed. When this request is submitted on time and contains all necessary information (cheque number and date, exact amount of the cheque, beneficiary’s name, etc.), the payer’s bank will honor it and no money will be credited to the cheque recipient’s account.

Stop payments and cheque holds can sometimes cause quite a confusion in your finances. To prevent this from happening, you can ask your employer or the other people who owe you money to pay it back only with a direct bank deposit. In this way, you will be sure to have the money available as soon as the deposit is processed, which usually does not take more than a couple of hours.