We live in a fast-paced world and are accustomed to immediate gratification. Just as we can get groceries delivered in minutes and order a new movie online with a few clicks, so too do we often expect our bank deposits to be available immediately.
But it doesn’t always work that way when it comes to finances. Some things do require a wait, even though it may seem like they should happen instantaneously. When money is put into a bank account, it can take a while for the deposited funds to appear and become available. Here’s a simple breakdown of how long it takes for funds to clear.
What Are Cleared Funds?
Depositing money into a bank account doesn’t always make those funds appear immediately. It can take time for the funds to clear and become available to use. This is because banks and credit unions may place a temporary hold on the deposit. When this happens, the account holder can see their “total balance” on their account and their “available balance.” The latter is the amount of the total balance minus any pending deposits. The available balance is, as the name indicates, what is available for use.
Why Banks Put a Hold on Deposits
One reason why banks don’t immediately declare deposits to be cleared funds is to help avoid issues that can arise when a deposit bounces. Having a brief waiting period helps protect customers from bank fraud and from paying unnecessary fees. If a bank were to allow a customer to spend funds from a check that ends up bouncing, the customer would then need to repay the bank the amount they deposited and probably pay an overdraft fee (even if the customer wasn’t at fault).
Some holds take longer than others. The federal government regulates the max amount of time a banking institution can hold onto the funds before they make them available to the account holder. Banks and credit unions also have their own policies regarding how long it will take for funds to become available after a deposit, which can be shorter than federal regulations. It can be helpful to review your bank’s policies for holding deposits so you can get a better idea of when cleared funds will become available. That way, you won’t accidentally overdraw your account.
How Do Cleared Funds Work?
Cleared funds appear in a bank account, such as a checking account, after the holding period ends. Usually, this holding period lasts until the next business day, but it can take longer. Weekends and holidays can slow this process down. The type of deposit made can also affect the timeline.
Here’s a specific example: If you deposit a check via an ATM that is not part of your bank’s network, you will probably have to wait a while to access the money. It may take up to five days before that check becomes available cash in your account.
Compare that to the case of electronic deposits made via the Automated Clearing House (ACH). The funds can actually clear and become available as soon as the same day. Having a paycheck deposited via direct deposit can help you access your money a lot faster than if you deposited a check at an ATM.
Breakdown of Times of Cleared Funds
All banks and credit unions have their own timeline they follow surrounding cleared funds. In addition, the federal government sets a maximum limit for how long they can make consumers wait to access their deposit.
Here’s a quick breakdown of the federally allowed wait times for different types of transactions, from wiring money to check deposits.
| Type of Deposit | Timeline |
|---|---|
| Direct Deposit | Up to the second business day |
| Wire Transfer | Up to the second business day |
| Paper check (less than $200)* | Next Business Day |
| Cash* | Same day or next business day |
| U.S. Treasury check* | Next Business Day |
| U.S. Postal Service money order* | Next business day |
| State or local government check* | Next business day |
| Casher’s, certified, or teller’s check* | Next business day |
| Mobile check deposit | Up to second business day |
| Federal Reserve and Federal Home Loan checks* | Next business day |
| Any other checks or non-U.S. Postal Service money orders | Second business day |
| Deposits made at an ATM owned by the customer’s financial institution | Second business day |
| Deposits made at an ATM not owned by the customer’s financial institution | Fifth business day |
*Deposited in person.
It’s worth noting that these are the maximum hold times allowed; in many cases these deposits happen much quicker. Again, it’s worth reviewing the bank’s funds availability policy. This will be listed in the account agreement given to you, the account holder, when you opened an account. You can also ask the bank for a copy of their holding policies or look online for it.
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When Can You Withdrawal Cleared Funds?
Deposits often clear in segments. That is, a portion of the funds will become available in your checking account before the whole amount deposited is ready for use. In most cases, the bank has to allow the customer to access $225 from the deposit at the start of the next business day. You could either withdraw cash or write a check. Usually the rest of the deposit is available on the second business day, unless something occurs to trigger a delay.
Cleared Funds vs Available Funds
The terms “cleared funds” and “available funds” both refer to funds that are available for immediate withdrawal or use. It’s important to keep in mind that simply depositing a check doesn’t mean you can use the money right away.
• Regarding a deposit, the $225 that must be made available by the next business day is known as your cleared or available funds. So on the next day, you can go ahead and use that amount.
• However, the rest of your deposit may not yet be available. If you try to draw against it, you are risking overdraft and charges. The full amount of the deposit may take up to a few more days to become ready for use.
Reasons Why Deposits May Be Delayed Until They Become Cleared Funds
There are a few different reasons why deposits can be delayed on their path to becoming cleared funds. Let’s examine some of these.
Deposits Over $5,000
When it comes to large deposits (excluding cash or electronic payments), the bank is typically required to make the first $5,525 of the deposit available by the second business day and the remainder available on the seventh business day, or later.
Recommended: Where to Cash a Check Without Paying a Fee
Brand New Customer Accounts
Newer customer accounts (less than 30 days old) can experience deposit delays up to nine days. Although with official checks and electronic payments, partial funds can be available the next day. (If you are in this situation and in a rush to make a payment, you can look into other ways to send money to another’s bank account, such as P2P apps. These can draw upon other available funds.)
Post-Dated or Fraudulent Checks
If a bank has reason to suspect a deposit is suspicious (such as if a check appears to be fraudulent), then it may hold the funds for longer than normal. A couple of examples of what might cause this kind of hold:
• A check is post-dated, meaning it’s been filled out to show a date that is in the future.
• A check is more than 60 days old.
The Takeaway
Cleared funds are the funds that become available once a deposit to a bank account clears. That means the money is ready for use. The timeline for funds clearing depends on several factors, such as where, when, and how the deposit was made and how large the amount is. Some funds may clear right away, while others can take a few days. However, federal laws are in place regarding how long a bank can wait to clear funds. By understanding this process, you can likely manage your financial life a little better and avoid situations that involve overdrafts or bounced checks.
Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.
FAQ
What is the difference between a cleared balance and an available balance?
A cleared balance (or cleared funds) and an available balance are the same thing — it’s the amount of money in your account that is available for immediate withdrawal or use.
How long does it take to get money cleared?
Some deposits clear as soon as the same day, but most generally clear the next business day. In some cases, though, a deposit can take as long as nine days to clear. Check with your bank to know their timelines.
Can you reverse a cleared check?
Once a check has cleared, there is little that can be done to reverse the transaction. If, however, a cleared check is to be found fraudulent, it may be possible for a bank to intervene.
About the author
Jacqueline DeMarco
Jacqueline DeMarco is a freelance writer who specializes in financial topics. Her first job out of college was in the financial industry, and it was there she gained a passion for helping others understand tricky financial topics. Read full bio.
Photo credit: iStock/RgStudio
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