Collection item
Encyclopedia
A collection item is an item presented to a bank
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. Collection items do not create float
. Payment must be received from the payor bank before the item may be credited to the depositor's account.
A collection item may be contrasted with a "demand item" or cash item, under which the bank credits the depositor's account immediately. Cheque
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:
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
s.
In the United States, fees are generally imposed on collection items due to the special handling which they require.
Bank
A bank is a financial institution that serves as a financial intermediary. The term "bank" may refer to one of several related types of entities:...
for deposit
Deposit account
A deposit account is a current account, savings account, or other type of bank account, at a banking institution that allows money to be deposited and withdrawn by the account holder. These transactions are recorded on the bank's books, and the resulting balance is recorded as a liability for the...
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. Collection items do not create float
Float (money supply)
In economics, float is duplicate money present in the banking system during the time between a deposit being made in the recipient's account and the money being deducted from the sender's account. It makes up the smallest part of the money supply....
. Payment must be received from the payor bank before the item may be credited to the depositor's account.
A collection item may be contrasted with a "demand item" or cash item, under which the bank credits the depositor's account immediately. Cheque
Cheque
A cheque is a document/instrument See the negotiable cow—itself a fictional story—for discussions of cheques written on unusual surfaces. that orders a payment of money from a bank account...
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 cheques or "bad checks".
- A bank draft.
- Negotiable instrumentNegotiable instrumentA negotiable instrument is a document guaranteeing the payment of a specific amount of money, either on demand, or at a set time. According to the Section 13 of the Negotiable Instruments Act, 1881 in India, a negotiable instrument means a promissory note, bill of exchange or cheque payable either...
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
Bankers' acceptance
A banker's acceptance, or BA, is a promised future payment, or time draft, which is accepted and guaranteed by a bank and drawn on a deposit at the bank. The banker's acceptance specifies the amount of money, the date, and the person to which the payment is due. After acceptance, the draft...
s.
In the United States, fees are generally imposed on collection items due to the special handling which they require.