What it is:
Uncollected funds refer to the balance of uncleared checks in a bank account.
How it works (Example):
When an account holder deposits a check into a savings or checking account, the bank must collect the specified amount of cash from the check writer's bank account. This collection takes place during a bank's clearing cycle, which may occur once or twice each business day.
Uncollected funds are the portion of the account balance that includes check amounts that have not yet cleared. For example, if an account holder deposits a check for $100, the $100 represents uncollected funds until the check clears.