A collection item (also called a noncash item) is an item presented to a
bank
A bank is a financial institution that accepts deposits from the public and creates a demand deposit while simultaneously making loans. Lending activities can be directly performed by the bank or indirectly through capital markets.
Beca ...
for
deposit that the bank will not, under its procedures, provisionally credit to the depositor's account or which the bank cannot (due to provisions or law or regulation) provisionally credit to a depositor's account.
[American Bankers Association, p. 77.] Collection items do not create
float
Float may refer to:
Arts and entertainment Music Albums
* ''Float'' (Aesop Rock album), 2000
* ''Float'' (Flogging Molly album), 2008
* ''Float'' (Styles P album), 2013
Songs
* "Float" (Tim and the Glory Boys song), 2022
* "Float", by Bush ...
.
Payment must be received from the payor bank before the item may be credited to the depositor's account.
[Fitch, p. 95.]
A collection item may be contrasted with a "demand item" or ''cash item,'' under which the bank credits the depositor's account immediately.
Cheque
A cheque, or check (American English; see spelling differences) is a document that orders a bank (or credit union) to pay a specific amount of money from a person's account to the person in whose name the cheque has been issued. The per ...
s (or "checks" as they are known in the United States) are usually handled by banks as a cash item, on the assumption that the payor bank will honor the check. Cheques create float (cash in the payor's account which the payor still has access to while the transition has yet to be finalized).
Other types of collection items include:
*
Dishonoured cheque
Dishonoured cheques (also spelled check) are cheques that a bank on which is drawn declines to pay (“honour”). There are a number of reasons why a bank would refuse to honour a cheque, with non-sufficient funds (NSF) being the most common one ...
s or "bad checks".
[Coe, p. 196.]
*A
bank draft.
*
Negotiable instrument
A negotiable instrument is a document guaranteeing the payment of a specific amount of money, either on demand, or at a set time, whose payer is usually named on the document. More specifically, it is a document contemplated by or consisting of a ...
s.
A noncash item is a special kind of collection item. Noncash items include checks which carry special instructions, checks drawing on funds in foreign banks, and
bankers' acceptance
A banker's acceptance is a commitment by a bank to make a requested future payment. The request will typically specify the payee, the amount, and the date on which it is eligible for payment. After acceptance, the request becomes an unconditional ...
s.
[Fitch, p. 321.]
In the United States, fees are generally imposed on collection items due to the special handling which they require.
See also
*
Warrant of payment
References
{{reflist
Bibliography
*American Bankers Association. ''Banking & Finance Terminology.'' Washington, D.C.: American Bankers Association, 1999.
*Coe, Charle K. ''Nonprofit Financial Management: A Practical Guide.'' Hoboken, N.J.: Wiley, 2011.
*Fitch, Thomas P. ''Dictionary of Banking Terms.'' Hauppauge, N.Y.: Barron's, 2006.
*Speidel, Richard E. and Rusch, Linda J. ''Commercial Transactions: Sales, Leases, and Licenses.'' St. Paul, Minn.: West Group, 2001.
Banking terms