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.

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.

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 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.