Next-Day Funds

Next-Day Funds

In banking, next-day funds are money that becomes available for use on the next business day following the day it is deposited. In investing, next-day funds are available the business day following a trade; however, most trades have used same-day funds settlement since 1996, based on the Group of 30's recommendations for improving settlement and clearance risk, efficiency and cost. Same-day funds are available the day the trade is completed or the day the funds are deposited. A statutory hold under the Expedited Funds Availability Act (EFAA) requires banks to make the first $200 of a deposit available the next business day, with $400 available on the second business day and the rest available on the third business day. Banks must make Thanks to the advent of electronic check conversion and substitute checks or image replacement documents (IRDs), deposited funds can often be made available the day after they are deposited, because the use of electronic check conversion and substitute checks substantially expedites the check-clearing process. In banking, next-day funds are money that becomes available for use on the next business day following the day it is deposited.

DEFINITION of Next-Day Funds

In banking, next-day funds are money that becomes available for use on the next business day following the day it is deposited. In investing, next-day funds are available the business day following a trade; however, most trades have used same-day funds settlement since 1996, based on the Group of 30's recommendations for improving settlement and clearance risk, efficiency and cost. Same-day funds are available the day the trade is completed or the day the funds are deposited. Some mutual funds, however, are available the next business day after the trade is made, or may not be available for up to three business days.

BREAKING DOWN Next-Day Funds

Bank deposits must be cleared and settled before they become available. This involves transferring deposits and withdrawals between banks and ensuring that sufficient funds are available to complete the transactions.

Thanks to the advent of electronic check conversion and substitute checks or image replacement documents (IRDs), deposited funds can often be made available the day after they are deposited, because the use of electronic check conversion and substitute checks substantially expedites the check-clearing process. A statutory hold under the Expedited Funds Availability Act (EFAA) requires banks to make the first $200 of a deposit available the next business day, with $400 available on the second business day and the rest available on the third business day. Banks must make their funds availability policies available to customers, but while most banks will allow for holds of two, three, five, or seven business days in their policies, they will usually be able to make funds available the next day thanks to the expedited check-clearing process.

Exceptions to the Next-Day Funds Rule

Some types of bank deposits must be made available as same-day funds. These include checks for less than $200, cashier’s checks, USPS money orders, U.S. Treasury checks and on-us checks, or checks drawn from the same bank as that at which they’re being deposited. Wire transfers, direct deposits and other forms of electronic deposits are also generally made available as same-day funds.

Cut-Off Times for Next-Day Funds

In order to receive funds the next day, they must be deposited before the bank’s cut-off times for processing deposits. This can happen as early as noon at an ATM or other off-premises banking location, and as early as 2 p.m. at a branch, although cut-off times for mobile deposits can be as late as 5 p.m.

Related terms:

Availability Schedule Defined

The term availability schedule refers to the period of time required for the funds from a deposited check to become available to the check recipient. read more

Business Day

A business day is a popular unit of time measure that typically refers to any day in which normal business operations are conducted. read more

Check Conversion

Check conversion is a reformatting service offered by banking merchants. Discover more about it here. read more

Checking Account

A checking account is a deposit account held at a financial institution that allows deposits and withdrawals. Checking accounts are very liquid and can be accessed using checks, automated teller machines, and electronic debits, among other methods. read more

Deposit in Transit

A deposit in transit is money that has been received by a company and sent to the bank, but it has yet to be processed and posted to the bank account. read more

Direct Deposit

Direct deposit is the deposit of electronic funds directly into a bank account rather than through a physical paper check. read more

Expedited Funds Availability Act (EFAA)

The Expedited Funds Availability Act (EFAA) was implemented to regulate the hold periods on deposits made to commercial banks.  read more

Investment Fund

An investment fund is the pooled capital of investors that enables the fund manager make investment decisions on their behalf.  read more

Regulation CC

Regulation CC is a federal policy that sets certain standards on the check-clearing process for endorsements and processing of funds. read more

Same-Day Funds

Same-day funds is a term for money that can be transferred or withdrawn the same day that it is deposited into the recipient's bank account. read more