[www.e-analysis.com/bonds/fed20.htm] Checks that you write on your bank eventually return to your bank and the amount of the check is deducted from your account. In between the time you write the check and it comes back, you have use of the funds because of a phenomenon called “float”. Individual checking accounts are handled much the same way this paragraph describes. Float is described as the period of time that two banks have the funds on their books. Suppose you pay your bill for a magazine subscription. You write the check on your bank, and mail it to the magazine company. When they deposit it, it is then “float” because your bank has not yet paid the check.

The Federal Reserve System handles float for large commercial accounts, in a method which is detailed in this article.

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