what is the float 
in financial terms the float is money within the banking system that is briefly counted twice due to time gaps in registering a deposit or withdrawal these time gaps are usually due to the delay in processing paper checks a bank credits a customer s account as soon as a check is deposited however it takes some time to receive a check from the payer s bank and record it until the check clears the account it is drawn on the amount it is written for exists in two different places appearing in the accounts of both the recipient s and payer s banks float is significantly less common today compared to past decades due to declining use of paper checks and adoption of digital payment services understanding the floatthe federal reserve the fed has defined various types of float holdover float results from delays at the processing institution typically due to the weekend and seasonal backlogs transportation float occurs due to inclement weather and air traffic delays and is therefore highest in the winter months the fed which processes one third of all checks in the united states observes that although the amount of float fluctuates randomly there are definite weekly and seasonal trends the federal reserve uses these trends to forecast float levels which are then used in the actual day to day implementation of monetary policy 1the formula to calculate float is the float represents the net effect of checks in the process of clearing a common measure of a float is the average daily float calculated by dividing the total value of checks in the collection process during a specified period by the number of days in the period the total value of checks in the collection process is calculated by multiplying the amount of float by the number of days it is outstanding for example a company with 15 000 of float outstanding for the first 14 days of the month and 19 000 for the last 17 days of the month will calculate its average daily float as individuals often use float to their advantage for example amanda has a credit card payment for 500 due april 1 on march 23 she writes and mails a check in that amount even though she doesn t have 500 in her bank account however she knows that her paycheck will be deposited in her checking account by march 25 and she counts on the fact that the credit card company probably won t receive and present her check for payment until april 1 she has 500 worth of float the time between the writing of her check and the time her check clears for those days if she were tech savvy she could essentially do the same thing by going online on march 23 and scheduling an electronic payment on the credit card company s website for april 1 again counting for her bank to have posted her paycheck by march 25 technological advances have spurred the adoption of measures that substantially speed up payment and hence reduce float these measures include the widespread use of electronic payments and electronic funds transfers the direct deposit of employee paychecks by companies and the scanning and electronic presentation of checks instead of their physical transfer the steady decline in the number of checks written each year combined with the rapid adoption of innovative and convenient payment services may make float a thing of the past real world example of floatlarge companies and financial institutions also often play the float with larger sums for profit namely the interest income they earn on an amount by speeding up its deposit into their accounts or slowing down a presentation for payment such moves are not illegal either for individuals or for institutions if the money involved is all their own however playing with float can spill into the realm of wire fraud or mail fraud if it involves the use of others funds in 1985 the brokerage firm e f hutton company now defunct pleaded guilty to 2 000 charges for deliberately and systematically overdrawing some accounts to fund other accounts 2 the firm was writing checks on money it did not have to profit from the float in effect getting millions in loans from the banks without the banks knowledge and without paying fees or interest it was in essence a floating scheme executed on a grandiose scale for years since the float is essentially double counted money it can distort the measurement of a nation s money supply by briefly inflating the amount of money in the banking system 