It is well known, though, that the cheque clearing system is indistinct. Therefore it is often this that causes the problem, as opposed to someone’s underhandedness.
How Cheque Clearing Works
It is key to remember that cheque clearing is done solely via computer. An account receives a cheque, and in order for it to be honoured, the bank in receipt has to contact the bank of the issuer, to see if they will. If the bank agrees that the funds are indeed sufficient, then the cheque clears. All carried out by computers.
Exemplary to this, is the story of Mr Morris and Mrs Unwin. Mrs Unwin pays a cheque from Mr Morris into her account. In the assumption that the money is now in her account, Mrs Unwin now writes a cheque for her cat’s veterinary bill. Without knowing that Mr Morris does not have money in his account for the cheque to clear. Therefore, when Mrs Unwin’s bank tries to get money from Mr Morris’ bank, both cheques bounce.
Cheques can take a few working days to clear. By a few, this means anything from three to seven working days. This timescale can be affected by:
1. When, during the week, a cheque is paid in. When not paid in on a conformable banking day, such as a Saturday, cheques often take more time.
2. Cheques usually clear at the fastest rate, when the same bank that they are paid into draws them. The time taken is also applicable to separate institutions, with building societies notoriously the longest.
3. Whether or not cheques are of the same currency.
Clearing Foreign Currency Cheques
Cheques drawn from foreign banks often take a while longer. Some banks treat certain currencies of cheques normally. A cheque in dollars perhaps. They work on the assumption that a cheque will clear, and therefore credit your account, with the subtraction of any foreign transaction fees.
Other banks though, display greater caution, and will wait for the process to be completed in its entirety. This can take six full weeks, as the cheques need to clear two banking systems.
Avoiding Charges For Bounced Cheques
To steer clear of bouncing cheques, you should have an awareness of your bank account, and what is and is not in there. Check things regularly, and know when standing orders and direct debits will be taken out. When you see an on screen balance, know whether this is going to be less soon, due to money going out, and therefore doesn’t write any cheques.
This article is written by Jonathan L Walker, on behalf of Claims Management
UK, specialising in helping people with their Reclaim Bank Charges