| The textbook definition of float is "converting a negotiable instrument into cash or the transit period required to turn a contingency into an asset." This means the time lapse between your deposit and the date the bank allows you to use those funds; or, the time lapse between when you make a payment and the date that debit is charged to your account.
Assuming that the money in question is "working," using floats is a way of "creating money." If you doubt this, be assured that while the sums involved may seem small, taking advantage of float on deposits is one of the ways commercial banks expect to make a profit. A very small ($10,000,000) bank, for example, can easily make ($50,000) a year simply by instituting a policy that gives them free use of your money for as long as possible.
Perhaps the first step in dealing with time-lapse is to minimize its use against you. Find a bank with a reasonable "hold" policy (the delay in crediting deposits to customer accounts). The difference between a hold policy of three calendar days and 14 business days on a NOW account with an average balance of $3,000 could be the difference between annual earnings of $165 and $0.
Once you have arranged to make your deposits work as long and hard as possible, you might give some attention to making time-lapse work to positive financial advantage. If you have a NOW account or a money-market account, by making payment by mail on the last possible day, you may keep that money earning as much as a week longer than otherwise, given mail delivery time and time for the draft to clear through the system. (A postmarked mailing is the legal equivalent of making payment in person on the same date.)
There are ways to use float in your savings program, too. There are still banks that offer an in-by-the-tenth, earn-from-the-first policy. You can rooutinely turn this to your advantage by the simple expedient of opening a second account in a day-of-deposit-to-day-of-withdrawal bank (we'll call it Bank 2) and playing one Bank against the other. Withdraw funds from Bank 2 on the tenth of the month, depositing them in Bank 1, thus earning an extra 10 days' interest on the sum every month. On the last day of the month, simply transfer funds back to Bank 2 and begin again. (Note: Some in-by-the-tenth banks offer this privilege only on a quarterly basis. Still, that's 40 days' double interest per year.)
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