Why a Bank May Hold/Return A Check

A check can be rejected by a bank for a variety of different reasons. Banks have the discretion to speed up funding or alternatively place funds on hold. It is up to you to maintain a positive relationship with your bank by keeping a positive balance and even developing a personal relationship with your banker. With that in mind, the below are some common reasons that may lead your bank to hold checks or not accept the check at all.

Insufficient Funds

If a client/customer has insufficient funds, the Bank may mark the account as NSF and reject a payment preemptively. If the check is initially accepted, this could result in a bounced check with additional fees.

New Account with Low/No Balance

If an account is newly opened with no transaction history, and has little-to-no balance available, a bank will most likely place a Hold on pending transactions to secure the funds. However, at times they may reject or return the transaction completely in order to reduce the risk of the merchant sweeping the account entirely.

Incorrect Routing or Account Number

Routing or Account number may be entered in incorrectly, and the bank cannot locate an account. Consult with the client to ensure that they have provided accurate information.

Wrong Check Address

Ensure that the customer address entered matches up with the address their bank has on file. This may not always be their most current address, and so it is best to verify with your client before submitting a payment. A bank that cannot confirm the address may reject or chargeback a payment.

The Check Is Made to a Name Not on the Account

Banks will often reject a check if it is made to a personal account name to a business account, or vice-versa, or if a check is made to a DBA that is not registered to the Business account. 

Previously Deposited

If the check number was previously already used for a client, then the check in hand could be seen as 'previously deposited.'

Large Transactions

Not all bank branches can handle a large transaction without advance notice or written authorization. Check with your bank if this may be the case.

Savings Account

Many savings accounts prohibit check payments, and could either place holds or reject payments completely. 

Non-Demand Deposit Account

Similar to savings accounts, there are many accounts that are incompatible for debits, such as Credit Card Check, Line of Credit, Home Equity or a Brokerage checks.

Bad Checkwriters

Although uncommon, some checkwriters have become flagged for repeatedly writing fraudulent checks, and are marked in a Bad Checkwriters database. 

Bank Risk-Mitigation

There may be other risk factors and protocols at either the bank being debited (your customer's bank) or the bank receiving funds. These factors vary, bank-by-bank, and many protocols may be automated by their system. It is advisable to reach out your bank if there may be any more information available.