Uncollected funds are checks, money orders, and other financial instruments that have been deposited into a bank account, but have not yet been released by the issuing bank or institution. Typically, banks place some restrictions on the withdrawal of these funds for a period of time. However, some banks will allow the client to withdraw a percentage of an uncollected fund bank deposit in certain instances.
At the time of deposit, every check or financial instrument that is not currency can rightly be referred to as uncollected funds. While the customer’s account will be credited for the deposit as if the instruments were currency, the bank will often require a waiting period before the funds can be withdrawn. Depending on the circumstances, this waiting period can be less than twenty-four hours or as much as five business days.
When depositing checks that are drawn on the same bank, the waiting period involved with uncollected funds is very short. This is because it is possible to verify the availability of funds to cover the check in real time. When this happens the depositing account is credited the same day, while the account of the payer is debited at the same time. Some banks will even honor cashing the check immediately, if the funds in the issuing account are showing as cleared and available.
For uncollected funds that are composed of checks that are drawn on other banks, the waiting period will be longer. Thanks to the increased efficiency of electronic banking today, verifying and drawing on uncollected funds can be done in less than half the time required even as late as the 1980’s. Still, the verification of these funds in bank deposits can take several days, especially if the deposits involve checks from banks located outside the country.
Banks may vary slightly in their procedures relating to uncollected funds. The policies and procedures are routinely included in the documents provided to the new customer as the time accounts are established. In addition, many banks post a reminder at teller stations and drive through windows that the deposited funds may not be available for immediate withdrawal.