Understanding Uncollected Funds: What You Need to Know

An uncollected balance account is one in which the deposit has been made (by check), but the check has not been paid by the bank on which the check (or checks) were drawn.

Significance

The significance of an uncollected balance means that even though $2000 in checks and $1000 in cash may have been deposited, for example, if the checks have not been paid by the bank they were drawn on, in reality there is only $1000 available in the account.

Considerations

Uncollected funds are not available for an account holder's bank to use as loans until the amount has been collected.

No Accrued Interest

If the check(s) has been deposited into an interest-bearing account, no interest is accrued on the uncollected balance until the check has been paid by the check writer's bank.

Potential Charges

Some banks may allow commercial customers to write checks on their uncollected balance. However, there is a charge for the amount of the uncollected balance used (usually prime rate plus a percentage).

Warning

If use of the uncollected balance is allowed, and if the check is returned unpaid by the check writer's bank due to insufficient funds, there is liability for the portion of the unpaid balance, plus any accrued interest.