Legal Definitions - uncollected funds

Definition: Uncollected funds refer to a credit given by a bank on a checking or deposit accountbased on a check or other payment that has not yet been received from the payor.

Example: Let's say you deposit a check for $500 into your checking account. The bank may credit your account with the $500 before the check clears. This means that the $500 is considered uncollected funds until the bank receives the payment from the payor.

Explanation: In this example, the bank has given you a credit of $500 based on the assumption that the check will clear. However, until the bank receives the payment from the payor, the $500 is considered uncollected funds. This means that the bank has not yet received the actual money and the credit is not yet considered a part of your available balance.