Written by:
Image
Paul Tracy

Paul has been a respected figure in the financial markets for more than two decades.

Prior to starting InvestingAnswers, Paul founded and managed one of the most influential investment research firms in America, with more than 2 million monthly readers. While there, Paul authored and edited thousands of financial research briefs, was published on Nasdaq. com, Yahoo Finance, and dozens of other prominent media outlets, and appeared as a guest expert at prominent radio shows and i...

View all posts
Updated January 16, 2021

What is a Negative Float?

Negative float is the amount of time between when a person writes a check and when that check clears the account.

How Does a Negative Float Work?

In banking, the formula for negative float is:

Negative Float = Account's Ledger Balance - Account's Available Balance

For example, let's assume John has $1,000 available in his checking account today. He writes six checks of $200 each, for a total of $1,200, and he deposits a check for $2,000. Neither the deposits nor the withdrawals have cleared his account yet (it takes three days for the checks to reach their recipients via mail and another day or two for the recipient to take the checks to the bank).

Nevertheless, John records the withdrawals and the deposit in his check register, bringing his account's ledger balance to $1,000 - $1,200 + $2,000 = $1,800. However, because the bank still hasn't cleared the checks or the deposit, it still shows an available balance of only $1,000 in the account. The difference, $1,800 - $1,000 = $800, is the negative float.

Why Does a Negative Float Matter?

Negative float implies that withdrawals are exceeding deposits in an account. This can create a tricky situation for account holders because until the deposits clear, any checks written over the available balance might bounce.

Ask an Expert about Negative Float
At InvestingAnswers, all of our content is verified for accuracy by Paul Tracy and our team of certified financial experts. We pride ourselves on quality, research, and transparency, and we value your feedback. Below you'll find answers to some of the most common reader questions about Negative Float.
Be the first to ask a question

If you have a question about Negative Float, then please ask Paul.

Ask a question

Paul has been a respected figure in the financial markets for more than two decades. Prior to starting InvestingAnswers, Paul founded and managed one of the most influential investment research firms in America, with more than 2 million monthly readers.

If you have a question about Negative Float, then please ask Paul.

Ask a question Read more from Paul

Read this next

Paul Tracy - profile
Ask an Expert about Negative Float

By submitting this form you agree with our Privacy Policy

Share
close
Don't Know a Financial Term?
Search our library of 4,000+ terms