When you deposit a check, your bank sends that check to the Federal Reserve, which sends the check to the check writer's bank. The check writer's bank then sends payment to the Federal Reserve, which forwards that money to your bank. These days, banks can convert checks into electronic form, so this process often occurs in a single business day. However, in the past it could take weeks for funds to travel from a bank on the West Coast to one on the East Coast and vice versa. Banks could hold your deposit until funds were actually received and therefore, banks used the term "collected" funds to refer to the money inside your account that had actually cleared.
Federal regulation CC limits the amount of time that a bank can hold a check deposit. In its current form, regulation CC limits hold times to a maximum of nine days, although in most instances banks can hold checks for only two business days. When a hold expires, your bank credits the money to your account and your posted balance represents the funds that have cleared. However, the posting occurs only after paperwork for all of the day's transactions has been processed, and this usually occurs sometime after the bank closes for the day.
Available Vs. Posted
When you check your bank account balance, you may see both an available balance and a collected or posted balance. The available balance reflects your posted balance minus any electronic withdrawals you have made since the last posting date. Your available balance also reflects electronic deposits and cash deposits that your bank has received that have not yet posted to your account. Depending on your bank's processing policies, you may or may not be able to draw against funds that are available but not yet posted.
Aside from showing you the closing balance of your account for each day of your statement cycle, your bank also uses your posted balance as the basis for paying interest on your deposit. Some banks charge a service fee if your balance falls below a certain level and, as with interest calculations, your bank uses your collected or posted balance as the basis for determining whether your balance fell below the required minimum level. Banks use the posted rather than the available balance because the latter can change throughout the day, which would make calculations difficult or impossible, whereas the former changes only once a day.