Business Glossary

number of days a bank can legally hold uncollected funds before crediting deposited funds to a customer's account. The Expedited Funds Availability Act of 1987 limits check holds to two business days for local checks and five days for nonlocal checks after September 1, 1990. The first $100 of any check must be available for use the next business day.

temporary delay in funds availability on checks drawn on out-of-town banks. Checks with 0-day availability are credited the same day as received. Checks with l-day or 2-day availability-the average time it takes to clear checks drawn on distant banks-are posted to the sending bank's deferred account, and funds from this account are moved on a daily basis to the reserve account as these checks are paid. Even so, a bank may get credit for transit checks before funds are collected from the paying bank, which in turn creates federal reserve float.

table showing the number of days needed to clear a deposited check. Under the expedited funds availability act, financial institutions must give their customers access to deposited funds within a fixed number of days, depending on whether a check is drawn on a local or nonlocal bank. Local checks (checks deposited at a bank in the same Federal Reserve Regional Check Processing Center as the paying bank) must be available for use within two business days after the day of deposit.