Why does it take a few days for checks to clear?

[fuzzybabybunny]

I've always wondered why it takes a few days for checks to clear after it is deposited. Why isn't it an instantaneous thing? Verify that the check is legit, verify that the funds are in the source account, verify the destination account, and then do an electronic transfer. Shouldn't that be all that's required?

 

[JJChicken]

I think its a safety mechanism to stop con-artists. E.g. if I steal your check book and figure out how to forge your signature - do you want the checks to clear instanteously??

 

[Eli]

I'm convinced its so the banks can shaft you. lol

 

[Kirby]

If you're depositing a check from another bank, how are they supposed to know right away if there's enough money? Checks have to go through book keeping also.

 

[Jumpem]

Checks have to be sent from the bank they are deposited at to the Federal Reserve branch nearest the issuing bank; and from there back to the originating back.

 

[1prophet]

Originally posted by: Eli
I'm convinced its so the banks can shaft you. lol

Correct

EXPECT THE CHECKS YOU WRITE TO CLEAR FASTER: Don't write a check unless the funds are already in your account. The checks you write will clear faster, but banks aren't required to speed up the time when they make funds available from the checks that you deposit

 

[IHateMyJob2004]

Originally posted by: Barack Obama
I think its a safety mechanism to stop con-artists. E.g. if I steal your check book and figure out how to forge your signature - do you want the checks to clear instanteously??

Pretty much because of fraud. Even bank checks have a hold these days.

 

[Foxery]

The delay originated when checks actually had to be mailed to the originating bank in the old days. (Maybe they still do?) Only your home bank can legally certify whether the check is good.

See the movie Catch Me If You Can for a fun example of how you used to be able to screw over banks with bad checks

 

[BoomerD]

Nowadays, it rarely takes checks more than 24 hours to clear. MOST banks now use an electronic clearing sytstem that verify's checks almost immediately. No longer can you depend on "Float time" to get by with writing a check a few days before your next deposit and hope to beat it to the bank...(unfortunately it seems like it never actually applies to checks YOU want to deposit!)

http://realtytimes.com/rtpages/20040930_floatcheck.htm

 

[alm4rr]

§ 229.12 Availability schedule. (exceptions & errata 12 cfr 229)

(a) Effective date. The availability schedule contained in this section is effective September 1, 1990.

(b) Local checks and certain other checks. Except as provided in paragraphs (d), (e), and (f) of this section, a depository bank shall make funds deposited in an account by a check available for withdrawal not later than the second business day following the banking day on which funds are deposited, in the case of?

(1) A local check;

(2) A check drawn on the Treasury of the United States that is not governed by the availability requirements of §229.10(c);

(3) A U.S. Postal Service money order that is not governed by the availability requirements of §229.10(c); and

(4) A check drawn on a Federal Reserve Bank or Federal Home Loan Bank; a check drawn by a state or unit of general local government; or a cashier's, certified, or teller's check; if any check referred to in this paragraph (b)(4) is a local check that is not governed by the availability requirements of §229.10(c).

(c) Nonlocal checks ?(1) In general. Except as provided in paragraphs (d), (e), and (f) of this section, a depositary bank shall make funds deposited in an account by a check available for withdrawal not later than the fifth business day following the banking day on which funds are deposited, in the case of?

(i) A nonlocal check; and

(ii) A check drawn on a Federal Reserve Bank or Federal Home Loan Bank; a check drawn by a state or unit of general local government; a cashier's, certified, or teller's check; or a check deposited in a branch of the depositary bank and drawn on the same or another branch of the same bank, if any check referred to in this paragraph (c)(1)(ii) is a nonlocal check that is not governed by the availability requirements of §229.10(c).

(2) Nonlocal checks specified in appendix B?2 to this part must be made available for withdrawal not later than the times prescribed in that Appendix.

(d) Time period adjustment for withdrawal by cash or similar means. A depositary bank may extend by one business day the time that funds deposited in an account by one or more checks subject to paragraphs (b), (c), or (f) of this section are available for withdrawal by cash or similar means. Similar means include electronic payment, issuance of a cashier's or teller's check, or certification of a check, or other irrevocable commitment to pay, but do not include the granting of credit to a bank, a Federal Reserve Bank, or a Federal Home Loan Bank that presents a check to the depositary bank for payment. A depositary bank shall, however, make $400 of these funds available for withdrawal by cash or similar means not later than 5:00 p.m. on the business day on which the funds are available under paragraphs (b), (c), or (f) of this section. This $400 is in addition to the $100 available under §229.10(c)(1)(vii).

(e) Extension of schedule for certain deposits in Alaska, Hawaii, Puerto Rico, and the U.S. Virgin Islands. The depositary bank may extend the time periods set forth in this section by one business day in the case of any deposit, other than a deposit described in §229.10, that is?

(1) Deposited in an account at a branch of a depositary bank if the branch is located in Alaska, Hawaii, Puerto Rico, or the U.S. Virgin Islands; and

(2) Deposited by a check drawn on or payable at or through a paying bank not located in the same state as the depositary bank.

(f) Deposits at nonproprietary ATMs. A depositary bank shall make funds deposited in an account at a nonproprietary ATM by cash or check available for withdrawal not later than the fifth business day following the banking day on which the funds are deposited.

 

[JJChicken]

Originally posted by: Foxery
The delay originated when checks actually had to be mailed to the originating bank in the old days. (Maybe they still do?) Only your home bank can legally certify whether the check is good.

See the movie Catch Me If You Can for a fun example of how you used to be able to screw over banks with bad checks

Yep thats what I was thinking as well. Great moive btw

 

[QurazyQuisp]

Originally posted by: Jumpem
Checks have to be sent from the bank they are deposited at to the Federal Reserve branch nearest the issuing bank; and from there back to the originating back.

This is true, except when the two banks are located within the same city. (headquartered)

 

[Epic Fail]

They don't have to pay interest for a week.

 

[DaWhim]

This is what I do when I deposit a check at a teller. "please cash & deposit." this way, I have instant access to the money. at HSBC, they require to write down my DL # tho.