What happens if checks for deposited funds are returned due to insufficient funds?

The correct understanding of the situation regarding checks returned due to insufficient funds is that interest will not be paid until the full funds are available. This reflects the principle that interest is typically calculated based on the actual balance of available funds in the account. When a check is returned because of insufficient funds, it indicates that the money from that check does not contribute to the available balance; consequently, interest should not be credited until the funds are confirmed as available.

This policy ensures that interest is earned only on funds that the financial institution can actually use, maintaining the integrity of the interest calculations. Therefore, if a deposited check does not clear and the funds are not available, the interest consideration is effectively nil until the situation is rectified.