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Cheques

Community Veteran
Posts: 1,236
Registered: 02-08-2007

Cheques

Why is it that in this modern age of technology I can send photos, video and other media almost instantly to the other side of the planet but if you lodge a cheque in the bank the money takes 5 working days to move from one bank to another?!
17 REPLIES
VileReynard
Seasoned Pro
Posts: 10,580
Thanks: 191
Fixes: 9
Registered: 01-09-2007

Re: Cheques

Because they would rather that you used a debit card which allows them instant access to your cash.

Community Veteran
Posts: 6,111
Thanks: 1
Registered: 05-04-2007

Re: Cheques

I don't know the precise process, but I believe the main reason is because part of the clearing process requires the cheque to be put in the post (I believe to the drawer's bank), thus putting it at the whim of whomever's responsible for delivering it.
Community Veteran
Posts: 1,236
Registered: 02-08-2007

Re: Cheques

I thought it was just another way for them to shaft you and steal your money. They are experts at that!
Community Veteran
Posts: 1,699
Registered: 30-07-2007

Re: Cheques

I believe that as soon as you use your debit card, the money is taken from your account, but it doesn't get into the other account for 5 days.  That means for 5 days the bank has the money at their disposal.  For that time it doesn't belong to anyone, but the bank has use of it.
Mulitply that up among all their customers, and most banks have millions, if not billions of pouinds at their disposal at any given time.  Often they lend it to each other on an overnight basis, (with interest of course) to aid liquidity. The interest from these loans goes straight to the bank.
That's partly what made the whole Northern Rock episode such a fiasco.  It was simply the other banks getting jumpy and not wanting to lend NR money over night (and it wasn't even their money!) Huh
VileReynard
Seasoned Pro
Posts: 10,580
Thanks: 191
Fixes: 9
Registered: 01-09-2007

Re: Cheques

Just thought I'd say that I don't have a debit card.
I pay by cash, credit card or cheque, usually. It gives me a few days interest free loan  Grin

Community Veteran
Posts: 6,111
Thanks: 1
Registered: 05-04-2007

Re: Cheques

For anyone interested, a quick google brought up this page about the British cheque clearing cycle.
Community Veteran
Posts: 2,911
Thanks: 168
Fixes: 3
Registered: 05-04-2007

Re: Cheques

Well me being the cynical person I am Cheesy
I seem to remember reading some years ago that the technology to transfer funds via cheques exists (and is implemented in other countries) but of course the banks don't want to implement it, since there is little benefit to them. No longer could they make interest holding onto funds stuck in limbo for a couple of days.
So in short, it's not going to happen unless the government force them to. Also I notice that many of the larger companies now have stopped accepting cheques, probably because debit cards now mean they're seldom used, and the company can save money in not processing them anymore in the knowledge that only a select few will be angered by the move.
Community Veteran
Posts: 1,100
Registered: 05-04-2007

Re: Cheques

Although instant money moving is possible, ask your bank how much they will charge for the privilege. I am guessing £20 per transaction.
From the point of few of the person writing the cheque, the longer the money is in your account the more interest (although only a small amount) you earn. I have written cheques that have taken up to 6 months to be cashed. That is 6 months extra interest I had on the amount that I would have not got if the transaction was instantaneous.
James
Grafter
Posts: 21,036
Registered: 04-04-2007

Re: Cheques

I was under the impression that the money appeared with the bank within a day and they used 5 working days so that they would gain the interest from it and hence doing it for free.
Community Veteran
Posts: 2,911
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Registered: 05-04-2007

Re: Cheques

Quote from: Spider
Although instant money moving is possible, ask your bank how much they will charge for the privilege. I am guessing £20 per transaction.

Yep I know, I think that's CHAPS isn't it?
Quote from: Spider
From the point of few of the person writing the cheque, the longer the money is in your account the more interest (although only a small amount) you earn.

I've had the same as well .. my point about the banks is not how long someone will wait before cashing a cheque, but when they do they will sit on the money for days earning themselves interest until they decide to bother crediting the payee.
Funny how money doesn't take long to be debited from an account isn't it?
Still, not that they care. Implemeting such a system would cost and bring no benefit to them.
Community Veteran
Posts: 1,100
Registered: 05-04-2007

Re: Cheques

The instant transactions are dealt with by CHAPS.
Each bank is different and agree about the length of time some banks take to show a credit on your account or treat it as cleared funds. As to the replacement of cheques, that is what Switch was meant to be, or so I was led to believe in the early days.
holdtight
Grafter
Posts: 1,634
Registered: 15-06-2007

Re: Cheques

Quote from: Jameseh
I was under the impression that the money appeared with the bank within a day and they used 5 working days so that they would gain the interest from it and hence doing it for free.

This was also the impression i was under too or am i just being cynical again
No what am i thinking its a bank.... of course im not
itsme
Grafter
Posts: 5,924
Thanks: 1
Registered: 07-04-2007

Re: Cheques

Quote from: Alex
Well me being the cynical person I am Cheesy
I seem to remember reading some years ago that the technology to transfer funds via cheques exists (and is implemented in other countries) but of course the banks don't want to implement it, since there is little benefit to them. No longer could they make interest holding onto funds stuck in limbo for a couple of days.
So in short, it's not going to happen unless the government force them to. Also I notice that many of the larger companies now have stopped accepting cheques, probably because debit cards now mean they're seldom used, and the company can save money in not processing them anymore in the knowledge that only a select few will be angered by the move.

Did you not read the link supplied by Be3G especially the truncation process? It seem that it's not the banks that control the process of cashing a cheque but government legislation.
Quote
Truncation
After many years of lobbying by APACS, in 1995, HM Treasury finally agreed to sponsor enabling legislation for cheque truncation by seeking the amendment of Section 45 of the Bills of Exchange Act 1882. This section requires cheques to be returned to the branch on which they were drawn for payment to be made. The legislative change was made in the Deregulation (Bills of Exchange) Order 1996. In a system of truncation, the movement of the cheque is to be halted at some stage during the clearing cycle and payment made electronically rather than by the physical presentation of the paper cheque at the branch address printed on the cheque. Initially cheques will be retained at some central point within the paying bank although this may eventually change to a point within the collecting bank.
pcoventry76
Grafter
Posts: 950
Registered: 27-08-2007

Re: Cheques

Quote from: seanbranagh
Why is it that in this modern age of technology I can send photos, video and other media almost instantly to the other side of the planet but if you lodge a cheque in the bank the money takes 5 working days to move from one bank to another?!

it's so they can charge the other bank interest, hence why barclays clear a cheque in 7 seconds as they dont bother with this.
it's all fat cat crap