On banks and checks
Jan. 26th, 2004 02:34 pm![[personal profile]](https://www.dreamwidth.org/img/silk/identity/user.png){kind=small}
ambitious_wenchOK, for those of you in the US, I have some practical information for you:
"What the hell is happening to my money when I deposit a check?"
One of my LJ acquaintances recently bemoaned how long it takes for a check to clear when they make a deposit.
Here's the scoop.
It depends on at least four, possibly up to six things:
What kind of check it is:
Personal or business (Payroll checks have no legal status beyond that of a business check.)
Cashier (now called a bank draft)
money order
Government check
The location of the bank it's drawn on in relation to the bank it's being deposited in
(see explanation below)
The amount of the check.
The time and date of deposit.
If it was deposited with a teller or at an ATM, in some cases.
And the reputation of the bank of source or individual who wrote the check sometimes comes into play. Also, sometimes the person who is redeeming the check.
Your boss hands you a payroll check at 3 PM on Friday. It's for $4999.99
You head down to your bank, and the teller tells you that your day of deposit is going to be Monday, because they have a teller cut-off time of 2PM, but if you were to put it in the ATM, it would mean that your day of deposit is Friday.
That's important. You decide wisely that you want to get that money as quick as possible, so you decide to take it to the ATM: But before you do, you ask her how long before the funds area available. She looks at the amount (Less than $5000), knows that the bank it's issued on is a good business partner, has done business with you personally, recognises you, knows that you have never had a bounced check of your own, nor deposited checks from others that have bounced, that the bank it's from is right across town, and so she says "Well, if you get it to the ATM before our cut-off time of 5, it should be available by Tuesday. That's if there are no holds on the funds at the other bank."
Generally speaking, most checks for under $5000 are cleared within 3 business days *after the day of deposit*.
Your bank should have specific times to determine the day of deposit available to you: After 2 PM at a teller, and after 5 PM at an ATM is pretty universal. DO NOT COUNT DAY OF DEPOSIT!
Saturdays, Sundays, and Federal Bank holidays DO NOT COUNT as business days, even if your bank is open on those days.
Location of the issuing bank in relation to your bank:
"On us" checks mean the same bank as the one you are depositing in. Those funds are available the first business day AFTER the day of deposit, PROVIDED the funds are available in the source account.
If your company uses the same bank as you do, and you deposited by the cut off time on Friday, the funds would be available on Monday.
Local checks--Across town, across state, or the bank's footprint and neighboring states. See your bank for specifics. These funds are available the second business day after the day of deposit.
If your company uses a local bank other than your own, and you deposited by the cut off time on Friday, the funds would be available on Tuesday.
Non-local checks: Third business day after the day of deposit.
If your company uses a non-local bank, and you deposited by the cut off time on Friday, the funds would be available on Wednesday.
Exceptions:
Anything over $5000--can be held for up to 10 business days AFTER the day of deposit: That $5000.00 check your boss gave you is going to take 2 weeks to become available. Probably. It can be waved by the bank. But not at the bank manager's level. Don't even bother asking.
If the maker of the check has a history of passing checks on insufficient funds or unavailable funds--the bank has a right to not make the funds available until they actually receive the funds from the other bank, but no longer than 10 business days.
Ditto the person cashing the check.
Or if the issuing bank has become insolvent--and then your chances are pretty darn slim of getting money for that check at all.
Government checks, Money orders, bank drafts (used to be called cashier's checks): These are usually treated as local checks, but you can specifically request "expedited" availability. YOU MUST ASK FOR IT SPECIFICALLY. Expedited availability does not make it the same as cash: it means the funds will be available the first business day after the day of deposit.
Asking the teller when the funds are going to be available isn't always the best method of knowing: Trust me, the regulations are complex, and your bank may have different criteria in place: Don't go screaming "BUT THE TELLER SAID....!" at a call center drone or a manager. There are circumstances that the teller may not know about and cannot be held responsible for.
A note on the difference between insufficient funds and unavailable funds:
Insufficient funds is where you have $20 available, no deposits awaiting availability, and you write a check for $30.
Unavailable funds is where you have $20 available, you've deposited a check for $10, it hasn't cleared, and the bank receives a check you wrote for $30.
On the courtesy of making a portion of a check available immediately: Some banks will make the first $100 of a deposit available immediately. This is a courtesy. The bank doesn't have to do it. Ask if your bank does or not.
Contrary to what people think, your bank doesn't get those funds immediately. In fact, local checks can take about a week for your bank to actually get the funds from the other bank. It's federal regulation that has declared that your bank has to make those funds available to you. That is why sometimes a check will "clear", and yet it can bounce the day after it cleared.
No, in spite of this miraculous age if electronic funds transfers, money isn't instantly available.
Hope this helps to avoid those insane overdraft and insufficient funds fees.
Go in to your bank, sit down with a manager, and ask her to explain their funds availibility policy to you. Keep ehr at it until you are SURE you have it pat. If you get contradictory information, challenge her on it. And ask for a copy of it, and READ IT.
It's your money. Know what's happening to it. And don't be afraid to shop around at other financial institution. Historically, credit unions have much more lenient policies.
Best of luck.
Edie
"What the hell is happening to my money when I deposit a check?"
One of my LJ acquaintances recently bemoaned how long it takes for a check to clear when they make a deposit.
Here's the scoop.
It depends on at least four, possibly up to six things:
What kind of check it is:
Personal or business (Payroll checks have no legal status beyond that of a business check.)
Cashier (now called a bank draft)
money order
Government check
The location of the bank it's drawn on in relation to the bank it's being deposited in
(see explanation below)
The amount of the check.
The time and date of deposit.
If it was deposited with a teller or at an ATM, in some cases.
And the reputation of the bank of source or individual who wrote the check sometimes comes into play. Also, sometimes the person who is redeeming the check.
Your boss hands you a payroll check at 3 PM on Friday. It's for $4999.99
You head down to your bank, and the teller tells you that your day of deposit is going to be Monday, because they have a teller cut-off time of 2PM, but if you were to put it in the ATM, it would mean that your day of deposit is Friday.
That's important. You decide wisely that you want to get that money as quick as possible, so you decide to take it to the ATM: But before you do, you ask her how long before the funds area available. She looks at the amount (Less than $5000), knows that the bank it's issued on is a good business partner, has done business with you personally, recognises you, knows that you have never had a bounced check of your own, nor deposited checks from others that have bounced, that the bank it's from is right across town, and so she says "Well, if you get it to the ATM before our cut-off time of 5, it should be available by Tuesday. That's if there are no holds on the funds at the other bank."
Generally speaking, most checks for under $5000 are cleared within 3 business days *after the day of deposit*.
Your bank should have specific times to determine the day of deposit available to you: After 2 PM at a teller, and after 5 PM at an ATM is pretty universal. DO NOT COUNT DAY OF DEPOSIT!
Saturdays, Sundays, and Federal Bank holidays DO NOT COUNT as business days, even if your bank is open on those days.
Location of the issuing bank in relation to your bank:
"On us" checks mean the same bank as the one you are depositing in. Those funds are available the first business day AFTER the day of deposit, PROVIDED the funds are available in the source account.
If your company uses the same bank as you do, and you deposited by the cut off time on Friday, the funds would be available on Monday.
Local checks--Across town, across state, or the bank's footprint and neighboring states. See your bank for specifics. These funds are available the second business day after the day of deposit.
If your company uses a local bank other than your own, and you deposited by the cut off time on Friday, the funds would be available on Tuesday.
Non-local checks: Third business day after the day of deposit.
If your company uses a non-local bank, and you deposited by the cut off time on Friday, the funds would be available on Wednesday.
Exceptions:
Anything over $5000--can be held for up to 10 business days AFTER the day of deposit: That $5000.00 check your boss gave you is going to take 2 weeks to become available. Probably. It can be waved by the bank. But not at the bank manager's level. Don't even bother asking.
If the maker of the check has a history of passing checks on insufficient funds or unavailable funds--the bank has a right to not make the funds available until they actually receive the funds from the other bank, but no longer than 10 business days.
Ditto the person cashing the check.
Or if the issuing bank has become insolvent--and then your chances are pretty darn slim of getting money for that check at all.
Government checks, Money orders, bank drafts (used to be called cashier's checks): These are usually treated as local checks, but you can specifically request "expedited" availability. YOU MUST ASK FOR IT SPECIFICALLY. Expedited availability does not make it the same as cash: it means the funds will be available the first business day after the day of deposit.
Asking the teller when the funds are going to be available isn't always the best method of knowing: Trust me, the regulations are complex, and your bank may have different criteria in place: Don't go screaming "BUT THE TELLER SAID....!" at a call center drone or a manager. There are circumstances that the teller may not know about and cannot be held responsible for.
A note on the difference between insufficient funds and unavailable funds:
Insufficient funds is where you have $20 available, no deposits awaiting availability, and you write a check for $30.
Unavailable funds is where you have $20 available, you've deposited a check for $10, it hasn't cleared, and the bank receives a check you wrote for $30.
On the courtesy of making a portion of a check available immediately: Some banks will make the first $100 of a deposit available immediately. This is a courtesy. The bank doesn't have to do it. Ask if your bank does or not.
Contrary to what people think, your bank doesn't get those funds immediately. In fact, local checks can take about a week for your bank to actually get the funds from the other bank. It's federal regulation that has declared that your bank has to make those funds available to you. That is why sometimes a check will "clear", and yet it can bounce the day after it cleared.
No, in spite of this miraculous age if electronic funds transfers, money isn't instantly available.
Hope this helps to avoid those insane overdraft and insufficient funds fees.
Go in to your bank, sit down with a manager, and ask her to explain their funds availibility policy to you. Keep ehr at it until you are SURE you have it pat. If you get contradictory information, challenge her on it. And ask for a copy of it, and READ IT.
It's your money. Know what's happening to it. And don't be afraid to shop around at other financial institution. Historically, credit unions have much more lenient policies.
Best of luck.
Edie
![[identity profile]](https://www.dreamwidth.org/img/silk/identity/openid.png){kind=small}
no subject
Date: 2004-01-26 12:36 pm (UTC)Payroll is deposited and available at 12:01 AM on my payday, Thursday.
State and Federal Tax refunds are deposited and available at 12:01 on the day of deposit.
No waiting for a check to "clear", yadda-yadda.
Caveat!
Date: 2004-01-26 01:03 pm (UTC)Edie
no subject
Date: 2004-01-26 12:38 pm (UTC)I'll pick it up from where you left off... That little check gets deposited at a branch or ATM. Sure, it looks like the teller did something. Like she tapped a few keys and deposited it into your account. Well... not exactly.
That check later goes to the ops center where the amount will then be encoded with MICR (Magnetic Ink Character Recognition). This is the funky numbers at the bottom of the check. If you look on the lower right hand side of a blank check you'll note that there are no numbers there. However, when you get your check back, the amount will be listed there. This encoding is generally done by hand. However, I've heard of some banks moving to more automated ways of doing this.
Then the check gets bundled with a bunch of other checks to be sorted. The sorters are generally about 20 feet long. You feed checks in one end and they spit out into various pockets along the length of the sorter. As ambitious_wench noted, "on us" checks are checks that are written from your bank. Other pockets might include several local banks. Other pockets still may include out of state banks that have a sorting relationship with your bank. For example... say your paycheck is written off of Fifth Third Bank in Ohio, and your bank has a relationship with them. Your check will be cleared more quickly than say a check written off Banc Boston which may not have a sorting relationship with your bank.
Anyway, once the check is sorted, it is then couriered to one of three places. 1) Directly to the bank it was written from. 2) To another regional bank that will do further sorting (see Fifth Third Bank example above). 3) To one of many Federal Reserve Banks that will do further sorting.
The Federal Reserve bank charges money for each check they sort. That's why banks form sorting relationships with other regional banks outside of their coverage area.
Now that I've explained that... let's talk about what could go wrong...
Say your check isn't picked up by the 2:00 deadline like it was supposed to be. Well, your check will still be processed, but it will effectively be handled as if it was tomorrow.
What if somewhere along the way your check gets eaten by a sorter. This might also delay the processing of your check (This happens more often than you might think).
Let's say your check gets sent to the wrong bank... this will delay the processing of your check... and so, and so on...
Even though we live in this modern society with digital this and online that... it's amazing how important that little piece of paper is. If that piece of paper gets lost along the way, your money is gone. Very odd. I will note that I have been out of bank processing for 6 years now. Many things have changed, but that should give you a bit of an idea of what's physically happening to your check.
--sam
no subject
Date: 2004-01-26 01:06 pm (UTC)Thanks! May I ask how you found me? Was it through my friend's journal?
Edie
no subject
Date: 2004-01-26 01:54 pm (UTC)it was through your friend's journal. Sorry, I should have noted that.
--sam
no subject
Date: 2004-01-26 01:59 pm (UTC)My bank offers an account option where overdrafts (up to a certain amount, I think) can automatically be taken out of a 'linked' savings account. I've never had to use the feature, but it's nice to know that it's there. And I have it set up so that every time a paycheck is Direct Deposited, a certain amount is then transferred into the savings account automatically. Very nice.
no subject
Date: 2004-01-26 02:13 pm (UTC)I can't get direct deposit because I'm a contract worker - and I had trouble when I first started with my bank. It would take over a week for my payroll check to clear. Because the contract workers' checks are apparently not cut from the same account in the company as the basic payroll checks.
I had it earmarked on my account after a while that those are my paychecks and are from an established company that they do business with.
This time around it just hasn't become availible - which is just annoying when I've grown accustomed to them being availible, at the latest, after 5 days.
Hopefully I get this other job and I can go direct deposit!