Beware of the Risks of Restricted Accounts

This can be done without warning and will remain in place until the case has been resolved, or any outstanding fines have been paid off. Account freezes are normally the result of a court order, and in some cases, they may be done by the bank itself. This usually occurs when the account holder has unpaid debts to creditors or the government, or when there is suspicious activity detected through the account. Capital One may place a restriction on your credit card for reasons that include an unactivated new card, fraudulent activity, credit limit or late payments. A card could be flagged for fraudulent activity if you make an unusual transaction, even if it’s a legitimate charge. Restricted cash is classified as either a current asset, which is used up within one year, or a non-current asset, which are long-term assets.

What Is Restricted Cash on a Balance Sheet? With Examples

However, banks and government organizations have the authority to place restrictions on bank accounts. It may even limit the number of deposits you can make and checks you can write. In some cases, an account holder can place restrictions on his own account.

Funds in the prepaid lease agreements account may be withdrawn to cover health, education and maintenance expenses for the minor until she becomes an adult or reaches the age of 21. A 529 account is a restricted account that is established solely to pay for a minor’s college education. Another sign is if you receive an official notification from your bank informing you that they have blocked access to your funds.

A restricted bank account can affect your ability to withdraw money as you’d like. An account holder, bank, government agency or probate process can all set restrictions on a bank account. There are several reasons why banks may freeze bank accounts, such as when there is suspicious activity or unpaid negative balances. In some cases, a government agency or court order may also be the cause of freezing a bank account. A bank might limit how many transactions you can make, including making withdrawals, writing checks and making deposits. Businesses and nonprofits might restrict who can use their accounts or what the money is used for.

As a result, if the restricted cash is expected to be used in the short-term, it is classified as a current asset. If it is not expected to be used within a one-year time frame, it is classified as a non-current asset. Since funds are separated on the balance sheet/income statement, restricted cash typically appears on a company’s balance sheet as either “other restricted cash” or as “other assets.” The first step in unfreezing a bank account is understanding why it was frozen in the first place.

Companies often hold restricted cash for capital expenditures or as part of an agreement with a third party. Companies also frequently set aside cash designated as restricted in planning for a major investment expenditure, such as a new building. Restricted cash appears as a separate item from the cash and cash equivalents listing on a company’s balance sheet.

This includes the cities of Louisville, Lexington, Frankfort, Hopkinsville, Owensboro, Paducah, and Ashland in Kentucky; and New Albany, Columbus, Clarksville, Seymour, Jeffersonville, Jasper and Indianapolis in Indiana. The state department of revenue also has the authority to seize and restrict your property taxes bank accounts for unpaid child support. An estate account is often created to collect and temporarily hold a deceased individual’s assets. While some assets are able to transfer directly to beneficiaries, others are required to go through the state’s probate process. If your account has been overdrawn due to insufficient funds, the bank likely will restrict your account. Any checks written or pending purchases against the account may be declined.

Savings Accounts

Once you’ve determined the cause of the freeze on your account, contact your bank directly to find out how they will allow you to unfreeze your account. Depending on the reason it was frozen, they may require additional paperwork or verification before releasing any funds from the account. Make sure that you understand exactly what is required of you to get your funds released so that there aren’t any further delays in getting access to them again. A blocked account can also refer to accounts that are frozen, either by the U.S. government for political reasons, or for other reasons (such as the death of the account holder).

What is a frozen bank account?

When an account is restricted, customers may visit a Regions branch to request access to protected funds such as government-sourced benefits received by direct deposit. We have placed your account in a restricted status, and you should not initiate or perform any further account transactions. At this time, we will not accept additional deposits to the account, and we may reject or return any account transactions and refer to you any third parties presenting transactions against the accounts. However, there may be occasions, such as when a bank account is blocked by a government, when any transaction whatsoever becomes prohibited.

If a customer fails to make regular payments on loans or credit cards linked to their bank account, they may find themselves with an insufficient balance and unable to access their funds. The bank will then freeze the account until all unpaid debts are paid off, and the balance is brought back into positive figures. A frozen bank account is a bank account that has been temporarily restricted from use. This can happen for several reasons, such as non-payment of taxes, fraud investigations, or a default on loan payments.

But consider the facts; a bank that may not have precisely followed a court order versus a child tort victim. If everything is in order and all requirements have been met, then it should only be a matter of time before your funds are released and available for use once more. Be patient but don’t hesitate to reach out if there are any delays so that you can resolve whatever issue may be causing them as soon as possible.

By John T. McGarveyJohn T. McGarvey’s practice concentrates on secured transactions, municipal law, the representation of banks and other lenders in litigation, and matters under the Uniform Commercial Code. Crediful is your go-to destination for all things related to personal finance. We’re dedicated to helping you achieve financial freedom and make informed financial decisions. Our team of financial experts and enthusiasts brings you articles and resources on topics like budgeting, credit, saving, investing, and more. It’s important to do this quickly to resolve the issue and get access back to your funds as soon as possible. When sales are made from this account, the proceeds are used to reduce the shortfall.

1. A recent deposit(s) to one of your accounts has been identified as suspicious, irregular, fraudulent, unauthorized, or unlawful.
2. A frozen bank account is a bank account that has been temporarily restricted from use.
3. The cash designated as restricted for that purpose is then freed up for the company to spend or invest elsewhere.
4. If it is not expected to be used within a one-year time frame, it is classified as a non-current asset.
5. This usually occurs when the account holder has unpaid debts to creditors or the government, or when there is suspicious activity detected through the account.

This could mean you’re unable to pay bills or make purchases with your debit card. You might also find that any checks written on the account will come back as unpaid. Regions provides links to other websites or apps for your convenience and does not control the content, services or products provided on the linked website or app, whose Privacy and security policies or procedures may differ. A recent deposit(s) to one of your accounts has been identified as suspicious, irregular, fraudulent, unauthorized, or unlawful. As a result, we have restricted the account until this matter can be resolved.

Why Your Bank Account Was Frozen and How to Fix It

Once an account in the United States is blocked by government mandate (such as during a time of war or distress), no funds in the account can be accessed without a specific release from the U.S. In Germany, blocked accounts, or Sperrkonto as they are called locally, are a special type of bank account for foreign students not from European Union (EU) member states. As a foreign student, you must provide proof that you have the financial means to pay for your course of studies and to support yourself during your studies.

Examples of Restricted Cash

He is a CFA charterholder as well as holding FINRA Series 7, 55 & 63 licenses. He currently researches and teaches economic sociology and the social studies of finance at the Hebrew University in Jerusalem. No single credit card is the best option for every family, every purchase or every budget. We’ve picked the best credit cards in a way designed to be the most helpful to the widest variety of readers.