What is Funds Availability?

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One of the most important pieces a banking relationship is funds availability. I know it may sound pretty basic, but there are many, many people out there that don’t understand funds availability. Funds availability impacts everyone with a banking relationship. Funds availability is when you can use the money that you deposit.  Funds availability can greatly differ from bank to bank, so I encourage you to check with your bank to find out what their policy is.  I’m going to give you a few examples of how it can work.

-A cash deposit is made into a checking account.  The funds are available immediately, and can be withdrawn, checks can be written, and the debit card may be used.

-A deposit is made with a check from another bank.  The bank is local, so the money will be available to use the next day.

-A deposit is made with a check from a non-local bank.  The funds take a few days to clear.

Large deposits may be subject to a Regulation CC Hold (Reg CC Hold).  It can take up to 7 days to clear.

Electronic payments and direct deposits normally act as cash deposits.

Money orders and official checks/cashier’s checks are NOT the same as cash and will be treated as a check.

-Some banks have what they call “cutover” during the day, say at 3PM.  Any deposits made after 3 PM will be credited on the next business day.

One of the most prevalent reasons people go overdrawn is due to not understanding their bank’s funds availability policy.  At my bank, if you make a deposit and the same day write a check that exceeds your “available balance”, you’ll get an overdraft fee.  Being aware of the policy can save you money and trouble in the long run.

What is your bank’s funds availability policy?

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8 thoughts on “What is Funds Availability?

  1. ami@40daystochange says:

    This is a great explanation of funds availability Mrs. Money. Tho’ it seems to me, these days, with everything moving to electronic banking, it’s crazy that so many transactions still remain subject to funds availability rules. For example, my bank treats our internet bill-payment requests like paper checks – and (at least when we started the program) they would actually create and mail a paper check on the day we requested the bill-pay. As a result, even though we requested payment on (say) Monday, they always warned that the creditor would not receive and process the check until 3-4 days later in the week. This meant that we had to designate a payment date on our bill pay account that was 3-4 days before the actual due date (which always felt kind of weird). Harrumph!

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    Mrs Money Reply:

    ami- Thanks! I agree- I don’t know why so many things are paper based any more. I think everything should be electronic. Of course, if that did happen, a lot of people would probably be out of jobs, so we’d have to find a happy medium. 🙂

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  2. Simple in France says:

    Hah! Truth be told, I have no idea what my bank’s policy is because I like to have a ‘float’ in my checking account so that I’m not a couple days away from bouncing a check. But they do hold checks for a bit, I think 24 hours or so.

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    Mrs Money Reply:

    Simple in France- I think that is an excellent rule of thumb! I have a line of credit for overdraft protection because I’m paranoid about going overdrawn.

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  3. Laura says:

    I’ve never had any problems with my bank with stuff like this. For example, I can deposit a cheque into a bank machine after hours, and then immediately withdraw the funds. The bank my husband was using on the other hand, used to hold funds from any cheque for several days. So these things definitely vary from bank to bank.

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    Mrs Money Reply:

    Laura- Wow! That is great. I like the way your bank operates. 🙂

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  4. Stay at Home Mom CFO says:

    I’ll admit it…I always flummoxed by the “available balance” vs “ledger balance” and how certain deposits are listed in “pending” but ARE available for withdrawal?! So like Simple – I just keep a buffer to keep my head from exploding:)

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    Mrs Money Reply:

    SAHM CFO- I agree! The balances can be so confusing. At my bank, we’ve got ledger, current, available, collected, etc. I work there and can’t keep it straight sometimes! 🙂

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