What is Float Time?

Malcolm Tatum

Float time is a term used to describe the period of time that takes place between the submission of a check for paying of an outstanding debt and the clearing of that check by the writer’s bank. In times past, the float time for this process would be anywhere from a couple of business days to a week. With the aid of modern technology, many banks are able to process payments submitted by check much faster, sometimes reducing the float time to a single business day.

Modern technology has helped reduce the float time between the submission of a check for payment of a debt, and the clearing of the check.
Modern technology has helped reduce the float time between the submission of a check for payment of a debt, and the clearing of the check.

The shortening of float time has helped to minimize an activity that many consumers once used, known as floating a check. Prior to the faster processing of checks for payment, consumers would sometimes write checks a day or two before a scheduled payday, secure in the fact that the checks would not be presented for payment until after a deposit had taken place. This could sometimes be helpful if unforeseen circumstances occurred that made it necessary to make purchases at once, rather than waiting for the payroll check to be deposited and posted to the checking account. Generally, financial advisors would urge consumers to avoid this type of strategy, since even a regularly scheduled direct deposit of a paycheck could be delayed in some instances.

Unfortunately, the longer float time sometimes led to some consumers taking a chance that the money to cover the face value of the check money would be in the account before the instrument was presented for payment. When the anticipated deposit was not completed before the check was presented for payment, this often resulted in what is known as a returned or bounced check. Along with the embarrassment of having to pay the face value of the check plus any penalties charged by the recipient of the document, the writer often was assessed a returned check fee by his or her bank. Depending on the original amount of the check, this unwise attempt to capitalize on the float time could easily lead to more expense than writing the check after funds were deposited and incurring the cost of a late fee on the debt.

Today, the shorter float time and the use of debit cards has greatly curtailed the chances of vendors receiving checks that are ultimately returned for insufficient funds. In addition, some forms of electronic check presentment software have made it possible for vendors to qualify checks in real time, before they are actually deposited into an account. This is particularly helpful for retailers who are able to reject checks written on accounts where there are insufficient funds to cover the face value of the instrument.

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