What are Clearinghouse Funds?
Clearinghouse funds are resources that pass through banks in the Federal Reserve System. The instrument of transmission is normally a personal check from an individual client or a business check from a company that is either a direct client of the clearinghouse or is a clearing member. The main function of clearinghouse funds is to verify receipt of the funds in a manner that is documented from the point of reception all the way through clearing the funds for use. The formula for processing clearinghouse funds is relatively straightforward. All transactions pass through what is called a central processing mechanism. The mechanism includes components that help to log the receipt of the check, make a tentative application to the account balance for the customer, and then hold the funds in abeyance until the check clears the issuing bank. Once the check has cleared, the clearinghouse will post the funds to the customer account and can use the balance to honor orders from the client. The o
