Uncollected funds are checks or other deposits made to an account that have not yet been paid by the issuing bank. These funds may show up in your account, but usually as pending. That lets you know that the check has been received by your bank but has not fully cleared. Your bank must make sure that the money is received from the issuing bank before you can access it.
If you deposit a large check, your bank may make some of those funds available immediately, while holding onto the remainder of the amount of the check. If you try to access funds from a recent deposit that are still pending, you may be assessed an uncollected funds (UCF) fee. Learn more about how uncollected or pending funds work.
Key Points
• Uncollected funds are deposits not yet paid by the issuing bank, appearing as pending in your account.
• Banks may hold a deposit to ensure the issuing account has sufficient funds to cover it.
• UCF fees are charged for accessing pending funds and, similar to NSF fees, may be about $30 to $40.
• While deposits typically clear on the second business day, Regulation CC allows banks to extend their hold on deposits in certain cases.
• To avoid UCF fees, consider maintaining a cash cushion, setting balance alerts, and scheduling payments strategically.
What Does an Uncollected Funds Hold Mean?
When you deposit checks to your bank account, the entire amount of the check may not be available to you immediately. This is especially true if the check is large or if you don’t have an established relationship with your bank. (Say, you opened your account less than a month ago.)
Because it usually takes a couple days for a check to clear, banks typically hold onto at least some of the funds for a brief period of time. This makes sure that the account on which your check is drawn has sufficient funds to pay the check.
The Expedited Funds Availability Act (also referred to as Regulation CC) specifies the details of these uncollected funds holds. Here are typical timelines for checks to clear:
• Checks issued by the government, drawn on the same financial institution as the payee’s account, cashier’s checks, and certified checks typically clear by the next business day.
• Most other checks take two business days to clear.
• Some checks, such as ones deposited to a relatively new bank account, could take up to five business days to clear, or longer in some cases (such as if there’s reason to believe the check might be uncollectible from the paying bank or if the check has been redeposited).
Worth noting: Typically, a financial institution must make at least the first $225 of a check available the next business day.
If you write a check or use your debit card to access pending money in your account, you may be charged an uncollected funds (UCF) fee. Here’s why: The money is not yet part of your available balance. This may occur even if the check is valid and eventually clears. The timing lag reflects how financial institutions operate.
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Advantages of Uncollected Funds
Here are some important ways that uncollected funds could benefit you.
Protection Against Fraud
While the delay in being able to access your money may seem frustrating at times, one advantage is that it can help prevent mobile banking check fraud and other forms of fraud. Having a delay between the time a check is presented to a bank and when the funds are made gives banks the time to verify and process checks.
Keeping the Banking System Safe and Affordable
In addition to helping protect individuals against fraud, this period of time also helps strengthen the overall banking system. If funds from presented checks were immediately available for withdrawal, it would likely increase the amount of people writing bad checks (which may be known as check kiting), which would drive up overall banking costs for everyone.
Helping You Manage Your Money
Knowing that you may be assessed an uncollected funds charge if you try to use pending funds may help you manage your money better. It’s a good idea to keep a small cushion of money in your checking account if possible. This can help ensure that you don’t need to rely on recently deposited money to pay your bills or make your usual transactions.
Disadvantages of UCF
Next, consider the potential downsides of uncollected funds.
Delay In Accessing Your Money
Probably the biggest disadvantage or frustration with the process of clearing a check is that it delays when you have access to your money. Say, a check representing passive income arrives or you receive a rebate, and you wonder when the funds will be available. This can be an especially challenging situation when you are counting on the money to make a different transaction.
Uncertain Delays
Pending funds may be frustrating to bank customers, and one of the biggest disadvantages is the potentially uncertain length of the delay. Again, checks will typically clear within two business days, and some may clear on the same business day, such as those that are a cashier’s check or a check written on a different account at the same bank.
Other checks may take several days or longer, depending on the bank and/or the amount of the check. For instance, certain ATM deposits and checks that raise reasonable causes for concern can take a longer period of time.
While typically no more than five business days should pass between when a check is deposited and when it’s made available, there are exceptions. If there’s a weekend in the middle of those days, that can mean a more significant wait. In addition, there can be cases in which Regulation CC permits financial institutions to add a “reasonable delay” (which could mean additional business days) for checks.
This can make it difficult to plan for when and how to cover your other expenses. Few people would want to have pending funds in their bank account when they need to pay their rent or go grocery shopping.
Fees for Uncollected Funds
Say you do try to spend against pending funds. In addition to the transaction not going through, there could be a steep fee. The amount of a UCF fee can vary depending on the bank, but they generally are around $30 to $40, similar to the amount of a non-sufficient funds (NSF) fee.
You might want to check what your bank charges, and be vigilant about not spending funds until you are sure the money is available. That can help you avoid incurring fees.
Recommended: Guide to Check Verification
Difference Between Insufficient and Uncollected Funds
Another kind of fee that many banks charge for accessing funds is called a non-sufficient funds fee, often referred to as an NSF fee. (An NSF fee is similar to, but slightly different from, an overdraft fee. With an NSF fee, the transaction doesn’t go through; with an overdraft fee, the bank covers the shortfall so the transaction can be completed.)
While UCF fees and NSF fees are similar (and usually a similar amount), there are a few key differences:
• Non-sufficient funds (NSF) fee: A fee charged for accessing funds greater than your total balance. For example, if your checking account balance is $300 and you write a check for $500, you may be charged an NSF fee.
• Uncollected funds (UCF) fee: This uncollected funds charge is assessed for trying to use funds that are still pending, usually from a recent check deposit. If your checking account balance is $300 and you deposit a check for $600, your available balance may still only be $300, until the check clears. If you write a check for $500, it may not go through and you may be assessed a UCF fee.
How to Avoid UCF Fees
Just like avoiding overdraft fees, there are a few simple ways to avoid UCF fees.
• One is to maintain a small cash cushion in your account. This helps ensure that even if you don’t have access to the full amount of recently deposited checks, you can still pay your bills.
• Another strategy involves setting up balance alerts or regularly checking your balances to make sure you can cover withdrawals or payments without risking UCF fees.
• You might also schedule your payment dates strategically. For instance, your credit card company might be willing to move your payment due date to better sync with your payday schedule, so you aren’t sitting and worrying about situations with pending funds.
Recommended: What Happens If a Check Bounces?
The Takeaway
When you deposit a check to your bank account, the entire amount of the check is usually not available right away. Instead, it generally takes a couple of business days for checks to clear and the money to be deposited to your account, and could take longer in some cases. While this process is going on, the funds may show up in your account in a pending status. If you try to access these funds, via writing a check or using your debit card, your bank may not complete the transaction. What’s more, it may charge you an uncollected funds (UCF) fee.
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FAQ
Can banks remove the check hold upon request?
It may be possible for a bank to remove the hold on a check, depending on their policy. Banks are not required to remove check holds, but it doesn’t hurt to ask. You can call the bank’s customer service line, or, if your bank has physical branches nearby, stop in and talk to the branch manager. Depending on the bank’s policy, the amount of the check, and your history with the bank, they may remove all or part of the hold at your request.
How long can a bank legally put a hold on uncollected funds?
Regulation CC governs the availability of funds deposited in checking accounts and allows financial institutions to put a hold on recently deposited funds for a “reasonable period of time.” This is generally considered to be two to five business days, but may go longer in some situations (say, depending on such factors as whether deposited by ATM or another method, or in situations in which a bank believes the funds may be uncollectible from the paying bank).
How is check kiting related to uncollected funds?
Without allowing time or uncollected funds to clear, check kiting could occur. This means a criminal could write a check on an account with insufficient funds, present it at another bank, withdraw the cash that would have instantly become available, and then skip town before the bank realized there were insufficient funds. Now, most banks classify recently deposited funds as uncollected funds for a period of time so they can verify that there are funds clear. This can lower the risk of check kiting.
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