National Check Professional (NCP) Certification Practice Test

What characterizes positive float?

1. Higher bank float compared to customer float

2. Higher customer float compared to bank float

3. No float difference

4. Negative transaction balances

The correct answer is: Higher bank float compared to customer float

Positive float is characterized by a situation where the bank float exceeds the customer float. In this context, bank float refers to the amount of money that a financial institution has available due to checks that have been deposited but not yet cleared. Customer float, on the other hand, pertains to checks written and issued by customers that have not yet been presented for payment. When there is a higher bank float compared to customer float, it indicates that checks deposited are taking longer to clear than the checks written by customers. This scenario is advantageous for the bank because it retains the ability to utilize those funds, which can be invested or used in other operations while still reflecting a positive balance. In contrast, a higher customer float would signify that customers are issuing checks that are not yet cleared, potentially leading to a situation where the bank has less available float. Similarly, having no float difference or negative transaction balances would not exhibit the characteristics of positive float, as these would represent different financial dynamics altogether. Thus, the correct assessment of positive float focuses on the relationship between the bank float and the customer float, identifying the bank's superior position in this financial interaction.