Cheque clearance

[Ray the DJ]

Why does it take at least 3 working days to clear a cheque?
With the technology available nowadays, surely it should be possible to clear it within seconds of submitting the cheque.

[sweetheart]

The issuing bank has to clear the funds from the named account before anything can happen. Before this can happen, the bank you pay the cheque into must validate the cheque (ie check if it really can be paid into your account - check name, amounts, dates etc). This is beyond what the cashier checks and the head office do random checks on the recieved cheques!! Tedious and time consuming, but I agree, technology has reached unimaginable places, why not here?

[JSB]

This is how the banks make their money of course.  Some banks insist on five days though and should be avoided like the plague. 

[Oneeyedvic]

On Monday (for example), cheque will be sent to the clearing centre, arriving in the early hours of tuesday morning. At the centre the cheques are mechanically read and sorted, and codeline and amount details are sent electronically to the banks on which the cheques are drawn by 11am on Tueday. The physical cheque is then batched up with others drawn on accounts at the same bank and handed over to the paying bank at the exchange centre.

 

The paying bank then debits the account on wednesday morning and the payee's account is credited. At the same time, all banks calculate the amount they must pay to, or receive from, each other on the basis of the cheques exchanged the previous day. The net balances are then settled accross accounts held at the Bank of England. This is the end of the clearing process  but banks say they need an extra day or two to ensure cheques are not forged or incorrectly filled out, or to stop payment if the issuer makes such a request.

 

[Oneeyedvic]

It is also worth noting that each bank has its own policy. Some banks (Barclays) will let you draw up to �1000.00 on the day you bank the cheque. Halifax take 4-6 days on certain accounts.

 

The Office of Fair Trading are looking into the process, but since cheque useage is in decline it is doubtful if anything will happen.