What are 'Bankable Funds'

Bankable funds are forms of payment that are accepted at financial institutions. Retailers and other organizations that directly accept payments from customers typically request that any payments be made in forms that can be redeemed and accepted by the bank.

BREAKING DOWN 'Bankable Funds'

For example, cash and cashier's checks are forms of bankable funds; they are readily accepted and deposited at all major banks. On the other hand, other forms of assets such as precious metals and stocks (although they may have considerable value), will generally not be accepted as a form of payment. That’s because these assets, though valuable, are not cash or easily converted to cash. A merchant may have to go to considerable trouble and expense to convert these forms of payment to currency; furthermore, the value of an asset such as precious metal or stock may drop in between the time that a merchant accepts it as payment, and the time that he or she attempts to convert it to currency. Currency, however, is not as volatile.

Personal Checks as Bankable Funds

Merchants may accept personal checks as bankable funds because they are relatively easy to convert to cash, especially when check conversion technology is employed. However, it can take a few days to convert a personal check to bankable funds, so some merchants will not accept them. Some merchants may also refuse personal checks out of concern that the checks might be fraudulent.

Furthermore, while most banks will accept a personal check for deposit, they may not make the funds available immediately. Most banks will hold funds deposited via personal check until the check clears, usually the next business day.

Money Orders and Cashier’s Checks as Bankable Funds

Money orders and cashier’s checks are also considered bankable funds, because they are fairly easy to convert to cash. However, just as with personal checks, most banks will place a hold on a money order until it clears. The best way to convert a money order to cash is to cash it at the issuing institution, such as Western Union. These cash funds can then be immediately banked.

A bank may also choose to place a hold on a cashier’s check until it clears, especially if the check is for an amount greater than $5,000. However, the bank must make the first $5,000 available immediately. But because funds from a cashier’s check are banked immediately upon deposit, it is possible to withdraw funds from a fraudulent cashier’s check before the bank realizes it is fraudulent.

RELATED TERMS
  1. Certified Check

    A certified check is a type of check for which the issuing bank ...
  2. Check Conversion

    Check conversion is a reformatting service offered by banking ...
  3. Positive Pay

    Positive pay is a banking service used to match the checks a ...
  4. Available Funds

    Available funds is the amount of money that is in your bank account ...
  5. Substitute Check

    A substitute check is a paper reproduction of a check that is ...
  6. Check Representment

    Check representment is a service offered by banks that resubmits ...
Related Articles
  1. Personal Finance

    Cashier’s Check or Money Order: Which Is Better?

    Money orders and cashier’s checks can be a convenient way to pay someone or to receive money, but each has its advantages and disadvantages.
  2. Personal Finance

    Certified Check vs. Cashier’s Check: Which Is Safer?

    Cashier's checks and certified checks are both official bank-issued payments that offer more security than personal checks, but one may be safer.
  3. Personal Finance

    How to Cancel a Check

    If you've had a personal check lost or stolen, the next best step is to cancel the check by putting a stop payment on it.
  4. Personal Finance

    The Complete Guide to Checking Accounts

    Here is the A to Z of checking accounts: types of accounts, basics on check writing, debit cards, overdraft protection and much more.
  5. Insurance

    Is Goldman Sachs Bankable After $5.1 Billion Fine?

    At around $155 and down almost 30% in six months, Goldman is now bankable on future rate hikes and the likelihood of a bottom in its recent decline.
  6. Investing

    Earnings: Quality Means Everything

    It's quantity that generates all the hype, but there are more meaningful factors that gauge true performance.
  7. Tech

    5 Useless Financial Products That Will Disappear Soon

    Bank deposit slip: what's that? Everyday tools of our financial life that went from indispensable to obsolete.
  8. Investing

    When Using a Money Order Makes Sense

    Money orders are usually the least expensive way to send "cleared" funds to pay a bill (or traffic ticket). Here's how they work and what to watch out for.
  9. IPF - Banking

    How to Write a Check in 5 Easy Steps

    For those of you who are new to check writing, here is a step-by-step guide on how to fill one out.
  10. Personal Finance

    Bank Account Tips For Young People

    If you’re just getting started with managing your own bank account, these tips will show you how to do it right.
RELATED FAQS
  1. What is the difference between investment banks and merchant banks?

    Merchant banks and investment banks, in their purest forms, are different kinds of financial institutions that perform different ... Read Answer >>
Trading Center