Holdovers

Holdovers are transactions, usually checks, that are in transit, and are delayed during the collection process until the next cycle. In most cases, this is the following business day. Holdover checks are then bundled into cash letters and presented to either a clearinghouse or the paying bank for deposit.

Holdovers are typically found in large clearinghouse banks. This type of hold is different from a hold that a bank puts on out-of-state or third-party checks. In this case, the check is usually held over simply because it was received too late in the day for same-day processing.

Holdovers usually occur when a bank doesn’t have enough time to process all the payments it has received to be credited before the close of that day’s business. For example, a customer brings in a large number of checks and other transactions to be deposited into his or her account before the end of business that day. But it’s near the end of the day, and the bank simply doesn’t have enough time to process all the transactions. Transactions that weren’t able to be processed due to this delay at the bank are holdovers.

When a bank has holdovers, it will provide the depositor with a deposit ticket processed on the date that it received the instruments. Holdover float may occur as a result of the delay in processing checks; when holdover float occurs, the money represented by the holdover checks briefly exists in duplicate, in both the account against which the holdover checks are drawn and the account into which they are deposited.

To avoid holdover float, some banks will post a debit to the account in which the holdover checks are to be deposited. When the holdover items are processed the next day, this debit will be zeroed out. Some banks will require customers who frequently cause holdover to sign an agreement specifying the conditions of the holdover. Other banks address the issue by refusing to allow holdovers at all, instead instructing customers that holdover items will be deposited the next business day.

Banks will typically only permit holdovers on behalf of customers with good credit ratings. When bank examiners see holdovers occurring, they typically take care to ensure that the holdovers are processed the next business day, and that holdover debits are zeroed out regularly.