Cheque Clearing Process - Different Banks

HUMBUG

I am confused by the cheque clearing process in banks and building societies and now worried about my mother getting charged for a bounced cheque.

Here's the story:
1. Mother's boiler condemned -freezing cold/no heating for her , so I hired a tradesman to install new boiler ,etc - cost me approx £5k which I paid out of my bank account.

2. My mother has an account with Halifax and I have third party mandate. I didn't want to go to the branch and ask them to raise a cheque for £5k direct to me as that would look suspicious (as if I was emptying her account). So I agreed with my mother to have the cheque for £5k be made payable to her . Then I would deposit the cheque in her TSB bank account . Then she would raise a cheque to be made payable to me .

Now here's the complication:
1. On the 28th Jan around 4:20 pm I visited my mothers TSB branch and deposited the Halifax bankers draft for 5K .

2. One the 29th Jan around 4:00 pm , I deposited her £5k cheque to me in my HSBC account.

Now the next day , while reflecting on the above, it occurs to me that HSBC might clear my deposited cheque quicker than TSB will clear the Halifax cheque. That they will try and debit £5k from my mother's account before it has been credited the £5k via Halifax cheque.

If the above happens , won't my mothers cheque to me be rejected and will she be hit with a penalty?

But if both banks operate the same cheque clearing times , won't everything go smoothly?

I'm finding this ultra confusing.

AndyPK

you really shouldn't be using cheques to do this.
Some cheques can take 28 days to clear if the system flags are problem.


Use internet banking to set up a transfer

HUMBUG

My mother is 88 yrs old and I am not allowed to operate an online account on her behalf (third party mandate rules). On reflection , I could have asked them to do a bacs transfer from her Halifax to TSB account but again , they might have restrictions that I am unaware of.

There might be a flag on her TSB account because its such a large transaction plus she might be viewed as a vulnerable customer due to her age. I don't mind if they delay the clearing of her 5k cheque to me until they conduct some precautionary checks . Just as long as they don't bounce her cheque to me and hit her with some penalty.

mgdavid

do you have an LPA for your 88 year old mother?

Would this allow you to manage online banking on her behalf?

JuicyJesus

AndyPK wrote: »

you really shouldn't be using cheques to do this.
Some cheques can take 28 days to clear if the system flags are problem.


Use internet banking to set up a transfer

Yep, that's the answer there.

Things tend to get quicker and less worrisome as soon as you remove cheques from the equation.

Brewer20

"I'm finding this ultra confusing"

So am I.


Why didn't you have the cheque made payable to the tradesman? Or as said do a bank transfer or didn't the tradesman want this?

HUMBUG

mgdavid wrote: »

do you have an LPA for your 88 year old mother?

Would this allow you to manage online banking on her behalf?

Yes I have LPA but the banks informed me that I am still not allowed to manage accounts online.

Fiona_CW

HUMBUG wrote: »

Yes I have LPA but the banks informed me that I am still not allowed to manage accounts online.

That seems odd. My mother managed my grandmother's accounts online for her for the last few years before she died and has recently got LPA for her aunt who is now in a nursing home and manages her bank accounts online

HUMBUG

Brewer20 wrote: »

"I'm finding this ultra confusing"

So am I.


Why didn't you have the cheque made payable to the tradesman? Or as said do a bank transfer or didn't the tradesman want this?

I usually pay all big bills for my mother using my own online bank accounts (its far quicker than me having travel personally to her Halifax bank to raise adhoc banker drafts). I pay for items/services she needs and then after a few weeks she pays me by cheque.

The tradesman wanted £1000 up front so I paid that immediately so he could order/arrange installation. I suppose on reflection I could have travelled to the Halifax and asked for a cheque to be made direct to the trader.

Still unsure whether the banks operate different cheque clearing times and at what point in their process they can bounce a cheque. Before they decide to reject a cheque can they see a pending credit waiting to be deposited in the account? Not sure if its all automated or whether they use a human decision making process.

jjj1980

All banks use the same cheque clearance timescales. In order to start the cheque clearance the receiving bank, in this case TSB, would send an immediate request to Halifax for the money. It then takes 3-4 working days on average for the money to be classed as cleared funds in the TSB. It’s at this point that withdrawals can be made against it.

As you issued a cheque from the TSB account and despite it into to HSBC on the day after the Halifax cheque was paid in, the cheque from TSB was effectively raised against uncleared funds. Which is against the terms and conditions of most bank accounts. In all three major high street banks I have worked for, we quite regularly cancelled accounts holders cheque books and refused to issue any further for this exact behaviour.

As previously advised, in future you should just issue the cheque first to the recipient from the Halifax account if that’s where the funds are. Alternatively, use bank transfers as they are usually processed via Faster Payment so credit same day, if not the next working day.

jjj1980

Realised I forget to answer the bit about unpaid cheque returns! These can occasionally come through after the funds have actually cleared depending I the reason for the return. Until the funds are clear in the account, it is unlikely a bank will allow a payment to go out. Especially for larger amounts.