Understanding Available Funds vs. Cleared Checks

It’s essential to know the difference between available funds and cleared checks to protect your finances. Many people mistakenly believe that when funds appear as available in their account, the check has fully cleared. In reality, these funds are provisional and can be reversed if the check fails to clear. This misconception can leave you vulnerable, especially to scams that take advantage of this timing gap.

What’s the Difference Between Available Funds and Cleared Checks?

When you deposit a check, you might see the funds in your account almost immediately. However, it's important to remember that these funds are temporary until the check fully clears. Even if your account shows a credit for the deposited amount, the bank can reverse it if the check doesn’t settle.

Why does this matter? If you spend provisional funds before a check clears and the check bounces, you could be liable for any amount spent. For example, if you have $1,000 in your account and deposit a $5,000 check, your balance may show $6,000. However, if you write a $3,000 check before the $5,000 deposit clears, and the original check bounces, the bank will reverse the $5,000 credit. With the $3,000 check already cashed, your account is now overdrawn by $2,000, and you are responsible for that loss.

How Scammers Take Advantage of the Gap

Scammers exploit the gap between available funds and cleared checks. They may give you a fraudulent check to deposit and then ask you to send or return part of the money before the check clears. When the check bounces, you’re left to cover the funds you’ve already sent out.

How to Protect Yourself from Check Fraud

To safeguard yourself against check fraud and avoid financial losses, follow these three tips:

• Accept Checks Only from Trusted Sources: Be cautious about accepting checks, especially from unknown or suspicious sources.
• Examine Checks Closely Before Depositing: If something feels off, contact your bank immediately for verification.
• Wait Until the Check Fully Clears: Before using any of the deposited funds, ensure the check has fully cleared with your bank.

At Central Pacific Bank, we’re committed to keeping you informed and protected. For more tips on how to stay safe from fraud, visit cpb.bank/fraud.