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Fundamentals of Funds Availability

In 1987, Congress enacted the Expedited Funds Availability Act. It defines when financial institutions are required to make deposited funds available to their customers. The Act was passed because a significant number of financial institutions were holding deposited customer funds far longer than was necessary for the funds to clear. Shortly thereafter the Federal Reserve enacted Regulation CC to implement the requirements of the Act. 

For the purpose of funds availability, the following are the most important definitions:

  • Account. An account is a transaction account such as a checking account, NOW account or share draft account. Savings accounts, money market accounts and time deposits are not accounts for the purpose of Regulation CC and therefore there are no limitations on how long funds deposited into those types accounts may be held. Most financial institutions use the same funds availability schedule for these accounts as they do their transaction accounts but that is not mandatory.
  • Available for withdrawal with respect to funds deposited means available for all uses generally permitted to the customer for actually and finally collected funds under the bank’s account agreement or policies such as for the payment of checks drawn on the account, certification of checks drawn on the account, electronic payments, withdrawals by cash, and transfers between accounts.
  • Business day means a calendar day other than a Saturday or a Sunday, January 1, the third Monday in January, the third Monday in February, the last Monday in May, July 4, the first Monday in September, the second Monday in October, November 11, the fourth Thursday in November, or December 25. If January 1, July 4, November 11, or December 25 falls on a Sunday, the next Monday is not a business day. Even though your institution may be open on a Saturday or Sunday, those days are not business days for funds availability purposes. Likewise, all federal holidays are not excluded from the business day definition, only those dates that are specifically enumerated. Your system or a variety of online references provide a Regulation CC calendar as a reference (and include, for example, adjusting for Juneteenth (effective 6-19-2021)).
  • A banking day is a business day on which a bank is open for carrying out substantially all of its banking functions. Banking functions for this purpose means its deposit operations. As with business day, if a bank is open on Saturday or Sunday, that day is not a banking day because it is not a business day. There is one more item that defines your banking day and that is your cut off hour. A bank can establish a cut off hour for receiving deposits at any time not earlier than 2:00 PM local time for its branches and on site ATMs and 12:00 PM local time for it offsite ATMs. So, if a bank selects 3:00 PM as its cut off hour then its Friday banking day, for example, ends at 3:00 PM on Friday and its Monday banking day begins immediately after 3:00 PM on Friday. An item deposited at 3:30 PM is deemed to be received during Monday's banking day.
  • Check. A check is what we normally think of as a check, that is a negotiable demand draft drawn on or payable through or payable at a bank. It also includes a demand draft on a Federal Reserve Bank, a Federal Home Loan Bank, the U.S. Treasury or a state or local government. U.S. Postal Service money orders and travelers’ checks are also checks. Two cautions, to qualify as a check, an item must be drawn on a domestic bank and must be denominated in U.S. currency. Accordingly, an item drawn on a foreign bank or denominated in a foreign currency is not a check and therefore does not fall under the available funds availability rules. Many foreign countries have funds available policies far different than ours. You may get a foreign check which returned weeks or even months after you put it in the collection system. Therefore, the best policy when you receive a foreign check or a check denominated in a foreign currency is to take it as a collection item and make the funds available to your customer only when you receive notification that the item has actually been paid.
  • The Fed has consolidated all of its check processing regions into one, so all checks are local checks.
  • The time that a deposit must be made available to a customer is measured from the time that the depositary bank is deemed to have received it. Funds deposited at a staff facility, ATM, or branch are considered deposited when they are received; funds mailed to the depositary bank are considered deposited on the day they are received by the depository bank; funds deposited to a night depository, lock box or a similar facility are considered deposited on the day on which the deposit is removed from the facility and is available for processing by the depositary bank. A deposit received by a bank on a day that is not a banking day, such as a Saturday or Sunday, or is received on a banking day but after the banks cut off hour is considered received on the following banking day.
  • Dollar amounts indexed. The dollar amount specified in §§ 229.10(c)(1)(vii), 229.12(d), 229.13(a), 229.13(b), 229.13(d), and 229.21(a) shall be adjusted effective on July 1, 2020, on July 1, 2025, and on July one of every fifth year after 2025, in accordance with the procedure set forth in paragraph (b) of this section using the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), as published by the Bureau of Labor Statistics.
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Before we get into the actual availability rules, let’s clarify a few things that Regulation CC does not do. First, it does not require our bank to accept any check, even a government issued check, for deposit. It is always the right of a bank to refuse to accept a check to accept it for collection only and to make the funds available only after the item is actually collected. Second, the regulation does not require a bank to open on any given day. There are FDIC rules that govern on what days a bank must be open, but nothing in Regulation CC does so. There are also no requirements on the hours that a bank must be open. Even if you have a 2:00 PM cut off hour and want to close at noon that is fine. The fact that a customer cannot make a deposit after 12:00 PM is the customer’s problem not yours. Finally, the regulation does not dictate the limits on the amount of cash that you allow a customer to withdraw on any one day. You may set cash withdrawal limits for security, operating or bonding requirements and that is fine. However, if a customer wants to make a withdrawal an excess of your daily cash limit, you would have to make the balance of the withdrawal available by cashier's check. 

Because the Fed has consolidated all of its check processing regions into one, all checks are local. Accordingly, the general rule is that all items deposited must be made available on the second business day following the banking day of deposit. If Monday is a banking day and the deposit is made that day it must be available withdrawal on Wednesday. Even if Wednesday is not a banking day for the bank, the funds must still be available, for example at an ATM.

There is a further rule that when funds must be made available on a particular day, they must be available by the later of 9:00 AM local time or when the bank’s teller facilities (including ATMs) are available for customer withdrawals.

The first exception is cash if it is deposited with an employee of the bank, such as over the teller line. If that is the method of deposit, then the cash must be made available for withdrawal the first business day after the banking day of deposit. If it was not made in person to an employee of the bank, such as at an ATM or the bank’s night depository, then it must be made available for withdrawal on the second business day after the banking day of deposit.

A check drawn on the bank in which it is deposited, that is an on-us check, must be made available on the first business day following the banking day of deposit.

Electronic deposits such as ACH transactions or wire transfers must be made available on the business day after the banking day that the bank receives information on the account to be credited, the amount to be credited and the payment and finally collected funds.

A check drawn on U.S. Treasury and deposited into the account of the payee must be made available on the business day after the banking day of deposit. If the account is a new account, then the first $5525 must be made available next day and the remainder of the check must be made available not later than the ninth business day following the banking day of deposit. If the treasury check is endorsed by the payee and deposited into the account of someone other than the payee, then the funds must be made available on the second business day following the banking day of deposit.

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Cashier's, certified checks or teller’s checks must be made available on the business day after the banking day of deposit if it is deposited into an account of the payee, is deposited with an employee of the bank and a special envelope or deposit slip is used if those are provided by the bank. If the deposit does not meet those three requirements, then it must be made available on second business day following the day of deposit.

State and local government checks have the same requirements as cashier's checks with the further requirement that the check be deposited in a bank within the state that issued it or within the same state as the location of the local government that issued it. 

Finally, a bank must make available next day up to $225 of funds deposited that are not subject to next day availability.