Clearing Time

IZZY01

Most of my charges were due to the length of time it took for cheques that had been paid into my account to clear. I find it confusing, that if I pay anything by cheque, it comes off my account, usually within about 3/4 days and yet if I pay in a cheque, it takes 6/7 days to clear. I wonder where the money lies in the 3 days in between???? I read somewhere that the clearing system has never changed since the seventies. Perhaps if the banks updated their systems to accomodate this, we wouldn't have these ridiculous charges.

Stephen_Leak

IZZY01 wrote: »

Most of my charges were due to the length of time it took for cheques that had been paid into my account to clear. I find it confusing, that if I pay anything by cheque, it comes off my account, usually within about 3/4 days and yet if I pay in a cheque, it takes 6/7 days to clear. I wonder where the money lies in the 3 days in between???? I read somewhere that the clearing system has never changed since the seventies. Perhaps if the banks updated their systems to accomodate this, we wouldn't have these ridiculous charges.

When you say "seventies", I read that as the "seventeen seventies". With the exception of the computers, the bank clearing system would still be recognisable to a patron of a coffee house.

Evidently, there is a new one day clearing system due in November.

John_in_the_city

The clearing cycle remains the same and is governed by strict rules imposed by APACS around the physical exchange of the paper. Anyway, the settlement is on the morning of business day 3, where day 1 is the day the cheque is received (i.e. physically at the bank, not when its mailed or deposited in an ATM etc). However, the current rules dont regulate when the money is credited to your account! Some Banks have built in a lag to the credit to your account to combat what they say is "increased fraud". So, for that period, the bank has the ability to allow their treasury to make short term overnight lending ... for a profit.

In november the new clearing cycle comes into effect as a result of Office of Fair Trading initiatives (OFT). The new cycle is called 2-4-6 which is an initiative to give transparency to what happens. ALL the banks will need to conform to this by 01/01/2008 at which time no bank will be able to offer a service that is LESS than that; i.e. they could give value in a shorter time frame if they choose to.

2- Two days after paying a cheque into a bank the customer should start earning interest on the money deposited. This is called Cleared for Interest.
4 - Four days after paying the cheque in, the customer should be able to withdraw the funds. This is called Cleared for Value.
6 - Six days after paying the cheque in, the customer can be certain the cheque will not be bounced. This is called Cleared for Fate.

Hope this helps.