Cheques to clear

darkcloudi

A quick question I paid in a cheque on Wednesday into my Halifax account for a large sum. this cheque was a First Direct cheque. On the pay in slip with Halifax it stated it will clear on Monday 25th Sept.

I checked my First Direct account this morning and it appears the sum has been deducted from my First Direct account on Friday but not credited to Halifax.

Any ideas why Halifax would do this? I thought the sum should be credited immediatly to my Halifax since its been deducted from First Direct.

GSD4ME

I am no expert in banking, but this sort of thing happens all the time, banks are very quick to take the money out of your account, but then take days to credit it.

I think this is usual bank behaviour, for example if I pay a bill by cheque at my own branch, the money is deducted from my account that day, but not credited to the person I am paying for 4 or 5 days. It is a real scam.

I am sure some of the experts on here can explain why it takes so long, but I never feel it is justified particularly as we are now in the twenty-first century.

oldwiring

Might this help?
http://www.bba.org.uk/bba/jsp/polopoly.jsp?d=263&a=367

grumbler

darkcloudi wrote:

...Any ideas why Halifax would do this? I thought the sum should be credited immediatly to my Halifax since its been deducted from First Direct.

In UK free BACS transfers take usually about 3 working days. The same day CHAPS transfers usually cost about £20. Cheque transfers are similar to BACS and are even more complicated. Unfortunately, you cannot expect free instant transfers when using cheques, although some banks pay interest on uncleared funds from the day the cheque was deposited.

anniecave

The Halifax also is not a clearing bank (I don't think) - so add on an extra day for that...

MarkyMarkD

It's up to each bank to determine when they allow you to withdraw against cheque deposits, and when they start crediting interest on cheque deposits (and the two are not necessarily the same).

Even though your cheque cleared through FD on the Friday, Halifax wouldn't necessarily be notified on the Friday if the cheque bounced, as bouncing of cheques is done by post.

Banks that give credit against cheques on the third working day (Friday) are taking a risk that the cheque might subsequently bounce. The longer the delay, the safer they are.

Many building societies (especially smaller ones) demand a week or even more to clear cheques for this very reason.

techno_geek

Unfortunately, you cannot expect free instant transfers when using cheques, although some banks pay interest on uncleared funds from the day the cheque was deposited.

Lloyds TSB pay interest on cheques as soon as they're cashed, not just as soon as they've cleared.

HSBC do this the other way around... When they take money out of your account to cover a cheque or electronic payment, you still earn interest on the money until it clears and arrives in the recipient's account.

Barclays, on the other hand, allow you to draw funds against cheques immediately!

It's just unfortunate that there isn't a bank that gives you all of the above!! :rolleyes:

Gordon_the_Moron

Is there a limit on the amount Barclays let you withdraw against an uncleared cheque, if not then I think it is just irresponsible. I've just got two cheques yesterday which I know for certain won't bounce (one from a large insurance company and one from a family member who's just sold a house and gave me some money) I think I might open a Barclays account, deposit them, withdraw it straight away as cash and pay it into a proper current account, is there anything to stop me doing that? I'll then keep the Barclays balance at zero until I need to do that again.

They are never going to do what HSBC and Lloyds TSB do, if they did they'd be paying two people interest at the same time on one sum of money.

MarkyMarkD

I don't believe that Barclays *do* allow you to withdraw against uncleared cheques - I believe that they just pay interest on them. Big wow.

techno_geek

On their website, Barclays state:

Instant access to cheques
Draw on cheques paid into your current account before they're cleared (subject to status and limit).

...which, I guess, means they count as some form of interest-free overdraft on top of your agreed OD until the cheques actually clear.

Coupon-mad

Unless you have a track-record as a Barclays customer I can't see them opening a new account and letting someone draw out uncleared funds. They'd be stupid (and breaking money-laundering guidelines I think) to do so, as any money launderer - or person with a dodgy rubber cheque - could use them to turn paper into cash then scarper.

As far as the OP is concerned, the timings you have mentioned are completely normal for paying in a cheque. Rather than read through all the article about banking, it's simply that:

- on day one you pay in the cheque
- on day two the cheque is at central clearing (i.e. passed from 1 bank to the other)
- on day three the cheque debits from it's bank a/c (or the bank decides to return it as unpaid)
- on day four your bank considers it cleared funds (unless they have had it returned as unpaid)

All days above are working days (Mon-Fri) and this is a simplistic explanation of Clearing Banks, there are exceptions like some Building Societies who take a week or more to consider a cheque 'cleared'.

There is also the possibility of 'late returns' when a cheque bounces later than day four, but usually only a day later - unless the Bank has sat on it or filed it in a drawer for a while! (this used to happen when I worked for HSBC in the eighties, some clerks found the faff of tracing & dealing with RD cheques too much hassle and left them in a drawer for someone else to deal with! :rolleyes: ).