Withhold Meaning [International Banking Basics]

In this article, we’re exploring withhold meaning in banking, finance, and cross-border transactions.

This will include a discussion about what withholding is, when and why it is applied, and answering common questions we receive on the topic.

This is part of our free series on sending a bank transfer and making the most out of your bank account, which you can access here.

Feel free to use the table of contents to jump ahead to the sections most relevant to you.

Table of Contents

  1. Withhold Meaning
  2. Why Do Banks Withhold Money?
  3. Frequently Asked Questions
  4. Do You Want Help Opening Bank Accounts?

Withhold Meaning

When banks withhold, meaning they do not immediately release funds to customers, it is usually because they are looking to confirm the transaction prior to giving access to the money. In other words, banks want to make sure that a deposit is not going to be refunded, canceled, or otherwise returned to the sending party prior to allowing their customer to have access to the funds.Β 

That said, banks are not the only financial institution that will withhold transactions, PSPs (meaning payment service providers) commonly withhold funds for several days before sending customer payments to the merchant using their platform.

Of course, there are other instances of withholding as well. The most common example of withholding is related to tax, more specifically withholding tax. In most cases, withholding tax applies to foreign non-resident individuals that invest in securities in high-tax jurisdictions. The jurisdictions will then apply a withholding tax to any gains incurred as a result of the investments.

That said, this article is focused on withholding in the context of banking and transactions, which we will take a closer look at below.

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Why Do Banks Withhold Money?

Why banks withhold money will ultimately depend on the circumstances, transactions, and individuals involved. For example, in many instances, banks withhold money in order to ensure that the transaction will clear before the funds can be withdrawn. In the case of checks, banks may withhold the balance until they are able to verify the origin of the check.

Frequently Asked Questions

Below are two of the most common questions we receive from people looking into the meaning of withhold. If you have further questions you would like to ask our team, don’t hesitate to get in touch.

What Does It Mean to Have a Payment Withheld?

What it means to have a payment withheld is that the bank has decided not to release a payment to the account holder. In most cases, when a bank withholds a payment like this, it is temporary and simply needs to be processed. In certain instances, the bank may also require additional information to confirm that the transaction meets its compliance requirements (and those of the regulator).

What Is an Example of Withhold?

An example of a withhold in the world of banking is when a bank or payment processor decides to withhold incoming transactions, meaning that the funds are not immediately released to the account holder. This commonly happens when an individual is a new client or has past transaction history that may reflect a less stable client profile.

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