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. When that does happen, they are considered cleared funds.
Wondering how this timing works? Keep reading to find out. You’ll learn:
• What are cleared funds and how do they work?
• How long does it take for funds to clear?
• When can you withdraw cleared funds?
• How do cleared funds and available funds differ?
• Why are deposits sometimes delayed?
What Are Cleared Funds?
Depositing money into a bank account doesn’t always make those funds appear immediately. It can take time for cleared funds (aka the funds the account holder can access and use) to appear in an account. This is because banks and credit unions place temporary holds 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
Here’s why banks don’t immediately declare deposits to be cleared funds: The waiting period can help avoid issues that can arise when a deposit bounces. This process helps protect customers from 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. Keep in mind that all banks and credit unions have their own policies regarding how long it will take for funds to become available after a deposit. Another factor in terms of funds clearing is that the federal government regulates how long banking institutions can hold onto the funds before they make them available to the account holder.
It can be helpful to review a 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 (typically 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 paycheck 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 an ACH. The cleared funds can actually be available as soon as the same day. Having a paycheck deposited via direct deposit or funds put into a flexible spending account that way can help you access your money a lot faster than if you deposited a check at an ATM.
Recommended: How to Set Up Direct Deposit
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 | Day of Deposit |
| Wire Transfer | Next Business Day |
| First $200 of Any Non-”Next-Day” Check Deposited | Next Business Day |
| Cash* | 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 |
| Checks and Money Orders Drawn on Another Account at the Same Financial Institution | Next Business Day |
| Federal Reserve Bank and Federal Home Loan Bank Checks* | Next Business Day |
| Any Other Checks or Non-U.S. Postal Service Money Orders | Second Business Day After the Day of Deposit |
| Deposits of Items Noted by “*” at an ATM Owned by the Customer’s Financial Institutions | Second Business Day After the Day of Deposit |
| Deposits Made at an ATM Not Owned by the Customer’s Financial Institution | Fifth Business Day After the Day of Deposit |
*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
It’s worthwhile to highlight the difference between cleared and available funds. Knowing the distinction between the two can help you avoid overdrawing your account or bouncing checks. 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 available funds. So on the next day, you can go ahead and use that amount.
• However, the rest of your deposit is not yet 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. When this happens, it is known as cleared funds.
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 deposits over $5,000, the bank is usually required to make the first $5,000 of the deposit available within one business day. (Some banks, however, say they can take up to four days to clear the amount.) And as for the rest of a deposit that’s over $5,000? A financial institution can put a longer hold on the remaining amount since it’s such a large amount, and you may find this scenario holds true if you try to use other check-cashing options.
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.
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FAQ
What is the difference between a cleared balance and an available balance?
Before a deposit fully clears and turns into cleared funds, the bank may make some of the deposit available by the start of the next business day. That partial deposit is known as available funds or an available balance.
How long does it take to get money cleared?
Some deposits can happen as soon as the same day, with most happening 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.
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SoFi members with direct deposit activity can earn 4.60% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a deposit to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate.
SoFi members with Qualifying Deposits can earn 4.60% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant.
SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.60% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.
SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.
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