When is a hold typically applied to a customer account?

A hold is typically applied to a customer account when that customer exceeds their credit limit or has overdue payments. This action is generally taken as a precaution to mitigate risk and ensure that the organization does not extend further credit to those who are already in a precarious financial position. Placing a hold on the account allows the company to review the customer's payment history and financial situation before making additional credit available, thus protecting the organization from potential losses due to non-payment.

In the context of customer accounts, holds are necessary to maintain financial stability both for the business and the customer. They serve as a signal to the accounts receivable team that there may be an issue with the account that needs to be addressed before any further transactions can proceed.