What is a 'Negative Float'

Negative float is the difference between checks written against or deposited in an account and those that have cleared according to bank records. When a checking account owner writes a check, the funds represented by the check remain in the account until the check is presented to and cleared by the check writer’s bank. The check writer typically maintains a check register showing the actual account balance based on funds on deposit minus checks which have and haven’t yet cleared. The dollar amount of checks not yet cleared represents the negative float.

BREAKING DOWN 'Negative Float'

Traditionally, a check writer keeps a register to be able to balance the account and avoid being confused by an account balance that may show funds which are pending withdrawal to cover checks written. Checks that have been written may take several days to clear if they are mailed or the payee delays in depositing the check.

For example, Anne has $15,000 of cleared or “good” funds in her checking account. After she has written and mailed out five checks of $1,000 each, the balance in her check register reads $10,000. However, her bank balance still shows $15,000, which means that the $5,000 in checks has not been cleared by the bank yet. That $5,000 is the negative float.

Electronic Checking and Debit Cards

Advances in automated banking mean that checks clear more quickly. Banks are no longer required to present paper checks. This and the widespread use of ATMs and debit cards means that bank balances update more quickly. With online banking, checking account holders can check their balance easily, and debit card transactions usually post immediately, and are reflected by the bank in the difference between the account balance and available funds. However, account balances officially update overnight, and this is when funds received or debited by paper check will be reflected. Although account holders may rely on online balances, debit card purchases don’t always post immediately, and the account holder is always responsible for keeping track of the actual funds available in her account.

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