Cheques and 'cleared' balances

Milarky

If you pay a cheque into your current account this should not 'clear' for withdrawal purposes for several days.

I'm wondering however if you can never the less withdraw against cheques 'immediately' without incurring overdraft interest. It appears to me that you may be able to.

I've maintained a positive 'account' balance throughout November but have made payments within my overdraft against cheque(s) within the normal 'clearing' period - i.e. before they are 'cleared'. And this month I haven't been notified of any interest charges (the same thing happened in October too)

Is a bank entitled to charge you for being 'overdrawn' where you only ever appear to have a positive balance? I would have thought so but what is the experience of others?

Thanks

gt94sss2

Milarky wrote: »

Is a bank entitled to charge you for being 'overdrawn' where you only ever appear to have a positive balance?

Yes, they are and posts here in the past have proved that they do..

Different banks have different policies though, in that some give interest free buffers etc..

If you mention which bank you are talking about, someone could probably point you to the relevant T&C.

Regards
Sunil

Milarky

Nationwide.

It makes sense that they can charge of course. You are effectively borrowing 'their' money until 'your' money (in the form of an offsetting cheque amount) is verified and can then be spent.

Snaggles

Most banks do tend to charge interest for borrowing against uncleared effects. And beware, if you would have been over your overdraft limit without the cheque, they may charge the interest at the 'unauthorised overdraft' rate too.

jamesd

See the 2-4-6 rules that took effect last Friday, 30 November 2007. If you can see it in your account, it's counting for interest purposes and this is to happen on the second business day after the day the cheque reaches your bank. Also observe note 2: "It is also the point at which this money will reduce the balance on which overdraft interest is charged".

So, you can draw on your overdraft funds and yes the deposit will reduce the overdraft so you won't actually have any overdraft interest to pay. Since the overdraft is reduced to zero or positive balance, you wouldn't be charged overdraft interest.

There are potential catches. For example, A&L's Premier Direct account terms say "if overdraft is used, 50p per day fee". This could be argued to be using the overdraft since that's the source of the cleared funds, so it's possible that the 50p fee might be charged. Something that needs clarification by A&L.

Also allow room for mistakes in implementation since this is new.

Milarky

Thanks jamesd, this is very helpful.

In my case I paid a cheque in on Thursday (note the day before the rules came into force) and today, Monday, is two working days after. I have a positive 'account' balance but a negative 'available' (c/f 'day 4') one and it went negative with something going out today.

Now my question (which is only good for today) is: would a cheque paid in just before the rules changed benefit from the rules once in effect? If 'yes' then I should be OK on this occasion. If 'no' then they can apply the previous charging terms can't they?

realaledrinker

As an aside, the rules had to be adopted by all clearing banks by 30 November, not on the 30th

jamesd

Milarky, when did the cheque money show up?

In my own case I deposited a cheque from me at the Post Office on Friday 30th and the money was taken from my account on the Tuesday, the second day after the day of deposit, just as expected under the new process.

Mikeyorks

Milarky wrote: »

Is a bank entitled to charge you for being 'overdrawn' where you only ever appear to have a positive balance? I would have thought so but what is the experience of others?

Thanks

Yes, I've been charged debit interest alongside credit interest .... where I've inadvertently let my account drift into my agreed overdraft for a day. Normally because of your stated reason - an uncleared cheque.

jamesd wrote:

If you can see it in your account, it's counting for interest purposes

Sorry - simply don't understand that, and particularly as you quote the 2-4-6 rule. May be the case if you pay your cheque in via a 3rd party route - but certainly shouldn't be if you pay at your home Bank. Where the credit will show immediately ... but it doesn't start the interest clock until the 2nd working day.

Or is it - 'if you can see it in your available balance'?

jamesd

Mikeyorks, I wasn't considering the possibility that the cheque would show up in the account sooner than the second day. As you say, if it does show up sooner, it wouldn't count until the second working day unless the bank chooses to act sooner than specified.

I'd expect to see it in the account transaction history from day two but not available until day four, leaving two days when it's in the account but not in the available balance.

Milarky

jamesd wrote: »

Milarky, when did the cheque money show up?

In my own case I deposited a cheque from me at the Post Office on Friday 30th and the money was taken from my account on the Tuesday, the second day after the day of deposit, just as expected under the new process.

I was referring to a cheque I deposited on Thursday 29th. Assuming the new 2-4-6 was only in effect from the next day at my bank (thus meeting the qualifying date to be participating in the rules 'by November 2007') then under old rules it would take until Wednesday (5th) to count for interest purposes. But on the 4th it was subject to rules which say that if it was deposited 2 working days earlier (and it was) then it ought to count for interest purposes. So I was musing on these 'crossing' items and choosing to apply the rules retroactively. Eg A cheque paid in Wednesday 28th November????