What is a Transaction Deposit?
A transaction deposit is a type of bank deposit. This type of deposit is liquid, which means the person who makes a transaction deposit may access his money without delay or restrictions. For example, a deposit into a checking account is usually a transaction deposit. A person with this type of account can withdraw against his deposit whenever he wants to as long as the funds are available. A savings account, on the other hand, may restrict the number or amount of withdrawals a person may make or institute a waiting period for accessing funds and may not be considered a transaction deposit account.
A person who has a transaction deposit account may use it in a number of ways. He may initiate electronic transfers of the funds in his account or even set up automatic withdrawals of the money. Often, withdrawals can be made from these accounts using telephone authorizations as well. A person who has this kind of account may write checks on the money held within it, use other types of instruments to withdraw his money, or use the money in his account to pay others electronically. In contrast, some accounts limit users to six or fewer transfers or withdrawals per month and may have strict limitations for withdrawals from automatic teller machines or payments using a debit card. These accounts are often labeled as savings deposits rather than transaction deposits.
It is worth noting that having a transaction deposit doesn’t always mean the account holder has 100-percent access to his money. For example, a bank may hold the depositor’s check for one or more business days while making sure the funds will be paid by the paying bank. In some cases, the bank may allow the depositor to withdraw a percentage of the deposit or a predetermined amount while waiting for the check to clear. In the case of longstanding accounts, the wait time for fund release may be much shorter. In spite of these check holds, the money in these accounts is still considered liquid.
While savings deposit accounts typically place restrictions on when and how account holders can access their money, this doesn’t mean account holders are stuck if they need to exceed transaction limits or restrictions. In some cases, the bank will process additional transactions but charge the account holder a fee for doing so. For example, it may charge a small fee if the account holder makes more than six automatic teller machine (ATM) withdrawals in one month.
In April, I opened a new checking and savings account with Wells Fargo by depositing $60,000. Although I was told my own money would not be available for two full weeks, is that legal? Within two business days, the checks I deposited were paid to Wells Fargo by my previous banking institution. For what legal reason, or what legal right, does a federally insured US bank have, to put a hold on one's funds after they become available?
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