Federal Reserve Float

Temporary credit to a bank's reserve account caused by the time lag in the collection of checks. Float is checkbook money on the books of both the paying bank and the depositing bank, in effect fictitious reserves created when a Federal Reserve Bank credits a Deferred Availability check to a bank's Reserve Account at the Fed but before it has collected payment on the check from the paying bank.

Checks drawn on banks in cities with a Federal Reserve Bank or branch office are treated as Immediate Credit checks and no Fed float is created. Processing and transportation delays are the major causes of Fed float, the largest source of collection float in the U.S. Banking system.