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If you deposit money, why doesn’t a bank allow you to withdraw money immediately? : Money Matters

Q: I recently held a street sale and deposited $600 in cash in person at my bank the next morning. I realized later that day that I should have kept more cash on hand and went back to the bank to withdraw $300 and they wouldn’t let me.

They said I could only withdraw the $40 I had in the bank before, plus $100 of what I had deposited. They said I had to wait until the next day. It was my money. I know there are holds on checks that are deposited, but why would they put a hold on cash?

— PT, Parma

A: Because they can.

Seriously, Congress passed the Accelerated Funds Availability Act in 1987, also known as the CC Regulation, to ensure that banks quickly make deposits available to customers. The settlement gives banks up to one business day to make cash deposits available for withdrawal or to pay for other transactions.

Banks place a one-day hold on most checks deposited to ensure the checks are good. You’d hope they didn’t put a one day hold on the money to make sure it wasn’t counterfeit.

The real reason for the delay: “A cash deposit doesn’t happen in real time,” said Anne DiTeodoro, spokeswoman for the Federal Reserve Bank in Cleveland. “The transaction must first be posted to the account. This happens the next business day.”

That said, several local banks contacted, including Fifth Third, US Bank, FirstMerit and Third Federal, all said they were making cash deposits in person on the same day, so there would be no delays if you wanted to withdraw money later the same day.

US Bank spokeswoman Lisa Clark noted that cash may not be available the same day at an ATM. Similarly, cash deposited at an ATM may not be available until the next business day “because until we open the envelope we have no way of knowing if it was a cash or check deposit,” FirstMerit spokesman Rob Townsend said.

Third federal spokeswoman Jennifer Rosa said it depends on how a bank handles its deposits. Some local banks process transactions in “batches” on a deferred basis. “At Third Federal, we process in-branch ATM transactions in real time, so if a cash deposit is made, the entirety of that deposit is available to the customer immediately after the transaction,” she said.

For more information on how long banks can hold deposits, visit: http://www.federalreserve.gov/pubs/regcc/regcc.htm

Q: Our 18-year-old daughter, who is starting college this fall, received an invitation to apply for the Discover More student card. We encouraged her to apply for the card to help her build her own credit.

She applied for the card, which will have a small line of credit of $750. A week after submitting the application, our daughter received a call from Discover asking her to mail the following documents: a copy of the college acceptance letter, a copy of her driver’s license and a copy of his social security card.

We have concerns about sending a copy of our daughter’s social security card in the mail. Is it appropriate? Wouldn’t that expose our daughter to identity theft?

–DL, Hinkley

A: I also wouldn’t jump in excitement at the thought of sending a copy of my child’s social security card either.

I called Discover spokeswoman Laura Gingiss. His explanation seems perfectly reasonable: “The Patriot Act requires us to verify a person’s identity before we can issue them a credit card, and the best way to do that is to check the credit.

“If an applicant does not have a credit history with a credit bureau, we require additional verification to ensure they are who they say they are.

“Requesting a copy of a Social Security card actually helps protect the applicant against identity theft – it helps us ensure that the applicant is who they say they are and not someone who has impersonated his identity.”

Gingiss added that many credit card issuers require such documentation.

The good news: you don’t need to send it by mail. Discover will accept a fax or photo by e-mail. If you applied for a credit card and you receive a request for information like this, ask the bank for instructions on where to fax or email the documents. In the case of Discover, you can fax it to (801) 996-2513.

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