“This is one of my pet peeves. It is a scam,”
It’s likely profit. They probably hold those funds in an interest-bearing account, kept at a high balance by all the additive ‘check holds’.
Absolutely. Here is an example of why it is BS, especially if you have a business account where you constantly need cash flow.
Couple times I had decided to change banks for my business. Once, I wrote a check for half of an account to start the new account at another bank. Because it was a sizable amount they claimed they had to hold all but 20% for 7 days. But they were immediately able to get the funds in their bank and removed from the first bank within minutes.
But now this amount was in limbo and no longer usable as cash flow for myself from EITHER account for 7 days. Not having this cash flow to work with ended up costing me money, and there was no reason for it at all.
Another time I closed an account in one bank and payed the extra for a cashier’s check for another sizable amount. The new bank did the same, they wanted to hold all but 20% for 7 days. Wait... This was a certified CASHIERS CHECK and considered as CASH to be redeemed immediately as CASH.
They told me this AFTER we did all the paperwork and set up the account. Then they charged me $50 on the spot for immediately backing out and closing that account. It was bait and switch. They had no right to do that with a cashier’s check, and they should have told me they were going to do this up front when I handed it to them. I would have told them to shove it.
It’s a con game that is still being used from a time when they wanted to make sure there was still funds in a checking account when THAT check hit the account it was written from. From when it would take several days in the mail to get to that bank and be cleared as “funds available”. No need for that now, now they take the money out immediately and then hold it anyways without reason.