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.

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 $600 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.

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.

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.