When you get a cheque bouncing, it does not mean that someone or some party has acted in bad faith. The cheque clearing system is vague to say the least.
How Cheque Clearing Works
A cheque being paid into an account initiates the cycle of a cheque clearing. The bank consults the issuing bank, to see if the cheque will be honoured. The cheque can only be cleared, if the issuing bank says there are sufficient funds. If the funds in the account are not deemed to be sufficient, the computer bounces the check. This is all done by computer.
Take the example of Mrs Jeremiad, and Mr Guinea. Mr Guinea writes a cheque to Mrs Jeremiad. Mrs Jeremiad is forthright in paying this into her account. She assumes that the money is now in her account, and therefore writes a check her self, so she can pay her sons gambling debt off. Unbeknownst to Mrs Jeremiad, Mr Guinea had insufficient funds in his account, in order to pay the cheque he wrote. When Mrs Jeremiad tries to get the money from Mr Guinea’s bank, she cannot, and both cheques end up bouncing.
Cheques can take a number of working days to clear. This period of time is between three and seven working days. There are factors to consider that effect cheques clearing:
1. The day of the week that a cheque is paid into an account. A cheque that is paid in on a weekday is generally subject to normal clearing conditions. A cheque on a Saturday however, may take longer to clear.
2.If a bank has a cheque paid into it that is from another one of its accounts then it will generally clear quicker. There are building societies that take longer than banks to clear cheques.
3. The currency of the cheque effects how long clearance will take.
Clearing Foreign Currency Cheques
It may take a while longer to clear a cheque that is of a foreign currency. Some banks will treat a cheque that is in American dollars for example, in the same they would treat one in sterling. They will just pay it into your account, with reductions made in accordance with foreign transaction fees.
Other banks out there can be somewhat overzealous. The whole clearing process has to go through, before an account is credited. Sometimes this can take a massive six weeks, as cheques are clearing two banking systems.
Avoiding Charges For Bounced Cheques
You should try and always be aware of what is going on with your bank account. That is how you avoid bounced cheques. Most people have standing orders and direct debits going out, so be sure to keep an eye on things. If payments are waiting to be taken, then the available money is likely to be less. If you are in any sort of doubt, then you should check your statements. E mailing or phoning your bank for details is also wise.
This article is written by Jonathan L Walker, on behalf of Claims Management
UK, specialising in helping people with their Reclaim Bank Charges