Completely OT; Cheque Clearance

[The Medway Handyman]

Since I started this Handyman malarky and opened a business account with the bank, I've always had a small overdraft - a few hundred quid, just to cover the ridiculous time taken to clear a cheque when its paid in. In practice it can be 5 days. Rarely used, but handy to have.

Every year they ring to ask if I want to renew it, but after the two year 'honeymoon' period they wanted a £200 arrangement fee! The answer comprised of two words, the second one being 'off'. Typical bank, £200 to arrange something that costs nowt. They then suggested a business credit card. Again the second word of the answer was 'off'.

Recently had my business debit card refused for a £6 transaction when there was loadsa money in the account, but uncleared. Rang my 'business manager' who instantly agreed to renew the overdraft completely free of charge - amazing what the threat of changing banks can achieve innit?

Interestingly he agreed to renew the facility until 'January 2010'. When I asked why, he said that changes to the banking system from that date would mean that cheques would be cleared so much faster that I wouldn't need the overdraft facility.

I've Googled for more info & can't find any. Anyone know what these changes are?

[Clot]

Same experience over the same timescale; with a similar but politer response from me.

Interesting!

I think it might be to do with the improved speed of transfer that the banks have belligerently agreed to.

[Andy Burns]

If anyone was going to know, you'd think this lot would, but they don't mention it, the present system was introduced a couple of years ago.

know that same-day electronic transfers are gradually be introduced.

[Dave Liquorice]

It's always a good one, the manager has to loads of paper work if they lose a customer.

Don't know maybe they are moving to using the Faster Payment system with branches keying in the cheque information at then end of the day? I know that when I pay a cheque in at my branch it shows online that evening but of course "uncleared". It's not a big step to use the FP system instead of the old cheque clearing system, I expect the bits of paper will still need to sent around the country but the actual instructions for payment can be done electronically.

[Doki]

Um. Wouldn't the provision of a business credit card have solved your cash flow problems much in the same way as the overdraft would? I would imagine that business overdrafts also charge a fair whack, whilst most credit cards offer 30 days grace for nothing...

[mogga]

Is that when they're expecting it to all fall apart based on this govt's incompetance?

[Dave Plowman (News)]

Thought many of the banks have just managed this all on their own?

[Paul]

Its because someone has finally cottoned on to the fact that banks clear most checks over night from the day they were paid in and have done so for many years, I know Barclays were doing it in 1974 and that was before computers as we know then today.

How do they get away with charging overdraft fees and bounced check/payment fees when the checks they are holding had already cleared but the funds not released.

[John Stumbles]

Because they're a load of bankers?

[S Viemeister]

Or a wunch of bankers?

[dennis]

Because some people still write cheques?

It can still take five days for a cheque to clear. Some banks now put the money into an account the day after they get the cheque. However by the time the cheque has got to the other bank it can still bounce. Then they take the money back from the account. don't spend the money until the five days are up if being in the red is going to be a problem.

Electronic transfers are more or less instantaneous and you know you have the cash.

[nightjar]

Define what you mean by 'clear'. The current system for the cash from a cheque is (1) shown as paid into your account - immediate (2) earning interest - guaranteed within 2 working days (3) available to draw from your account - guaranteed within 4 working days (4) the bank can't claim it back if the issuer does not have funds to cover the cheque - guaranteed within 6 working days. A lot of people think (1), (2) or (3) is clearance, but only (4) is.

There was and probably still is immediate presentation, in which you got to stage (4) immediately, but it attracts a lot of bank charges. In 1967, the company I was working for did it regularly, but only for amounts of £10,000 or more.

Colin Bignell

[The Medway Handyman]

Don't like them TBH & if you do run over time the interest is horrendous. I only have one trade acount from the place I buy decking timber & as soon as the client pays me I take a cheque straight around to them & pay it off.

[The Medway Handyman]

The collective noun is a 'wunch' of bankers :-)

[Andrew Gabriel]

Cheques never irrevokably clear anymore. This was covered on BBC's Moneybox programme a few years ago. Although the payer can't cancel the cheque after it's cleared, the banks can claim the payment back without any limit if the funds are later found to have been the result of fraud, and is most likely in the case of defrauding the bank. This came to light when some people found cheques apparently bouncing some 6 months after they thought they'd cleared.

Check the sort-code number of the source and destination account at

see if both support the Faster Payments system. Otherwise it's usually about 3 days. Each back also applies a max limit to the transfer value they will pass over the Faster Payments system, and in some cases they might prevent the first payment to a new payee using it, to limit the speed of money transfer which is at higher risk of being fraudulant.