Bank cheques...grrr!

[Geoff]

<rant>
One thing in life that really bugs me is that bank cheques take *3* business days to clear!! I have just received a bank cheque from a Westpac bank...I have a westpac account - do you think it would clear immediately, even though the funds have CLEARLY been paid, the banks take 3 days to pay this!? This is, in my opinion robbery! Anyone from the banking sector care to give any kind of explanation as to why this is? The fat cat bank directors become richer as our money sits longer earning them interest while we wait for the funds to 'clear'. Yet...when we spend on our credit cards, the money is gone as soon as you've signed...it's just not right.

</end rant>

[Reschsmooth]

<partial explanation but in no way want to come across as defending the banks>

Geoff, when you deposit a cheque (bank or personal or government), the funds are credited to your account straight away and you begin earning interest (albeit something like 0.2% pa if it's like my account) immediately. So, whilst the funds may not be available*, they should still be earning interest.

* I agree that it is ludicrous that a bank cheque is not available for 3 days.

My account is set up to make some, most or all of a banked cheque available immediately!

I do find it funny that a tax refund cheque (issued by the RBA) does not immediately clear, as if the bank needs confirmation that there are sufficient funds in the paying account!

<end partial explanation but in no way want to come across as defending the banks>

[jamesw]

give me 10 mins i'll write an essay about it for you i'm in banking

[Killakoala]

I used to 'work' in a bank, that doesn't exist any longer.

I would hazard a guess that due to copious amounts of fraud with bank cheques over the years the cheque needs to be verified as valid before the funds are cleared.

My two cents plus interest.

[jamesw]

<rant>
One thing in life that really bugs me is that bank cheques take *3* business days to clear!! I have just received a bank cheque from a Westpac bank...I have a westpac account - do you think it would clear immediately, even though the funds have CLEARLY been paid, the banks take 3 days to pay this!? This is, in my opinion robbery! Anyone from the banking sector care to give any kind of explanation as to why this is? The fat cat bank directors become richer as our money sits longer earning them interest while we wait for the funds to 'clear'.

it basically comes down to fraud.

i work in a credit union, we get emails almost every day about stolen bank cheques, medicare cheques, tax office cheques, etc.

essentially the clearance process is there to:

a. ensure funds are availible
b. ensure that the cheque has been endorsed correctly (verified sigs)
c. ensure that the cheque has not been washed... ie is cleaned of its initial payee / amount details and replaced with false payee / amount
d. ensure that the cheque is in date and written amount and numerical amounts match... sounds dumb... but i spent some time as senior teller and you'd be surprised how many dumb mistakes are made by tellers (ie accepting forward dated or stale cheques, or cheques with the written and numerical amounts not aggreeing...)

i can sort of understand the gripe you have with a bank for not accepting their own bank cheque. but it just comes down to fraud. with a 3 day clearance, it basically minimises risk of fraudulent cheques being paid upon down to zero.

having said that, the institution i work for will clear our own bank cheques, other bank/cu cheques, & ato cheques. it basically comes down to the size of the financial institution, and how much risk they are willing to take.

Yet...when we spend on our credit cards, the money is gone as soon as you've signed...it's just not right.

</end rant>

uuhhhhh not entirely correct....

with visa cards, your account is not neccesarily debited straight away. i can walk into a shop, spend $15 bucks, and it might not debit my account for a week or so. in fact, merchants have up to 45 days to debit your account.

for larger transactions, merchants tend to check your account for availible funds and restrict them so you cannot overspend.

we run into problems with this at work, particularly with visa debit cards (they operate using the same infrastructure as the visa credit card system). people often either:

-forget they diid a bunch of transactions, then they all pile up and come through at once... most people think that when you use your visa, press credit and sign the merchant checks for avail funds
or
-know the way the system works and abuse it when they dont have money.

either way they run into overdrawn fees. don't get me started on those! $10 a pop at my work, but i know at some of the larger banks they are $30-40!!!

[ATJ]

Yet...when we spend on our credit cards, the money is gone as soon as you've signed...it's just not right.

Actually, no, at least with all of my credit cards and most of those that are advertised. Most will give you up to 55 days credit, interest free. i.e. you spend the money, you get the goods and you don't actually lose the money until you pay the credit card bill. And if you pay the bill on time there is no interest at all. That's a pretty good deal from my thinking.

I don't understand why people would want to use a VISA debit card.

Edit: oops... that'll teach me to not read all the posts in a thread before posting.

[jamesw]

RE above... its possible to get 45 days on top of 55 days interest free. it can be up to 55 days from the time the merchant puts the trans through that debits your account...

I don't understand why people would want to use a VISA debit card.

lots of people are not eligable for credit cards, don't like monthly bills, etc.

credit cards are a dangerous thing for a lot of people. you dont really realise that untill you work in financial services and see people really, really get in trouble.

you dont realise how nasty the pokies are untill working in financial services either...

[ATJ]

lots of people are not eligable for credit cards, don't like monthly bills, etc.

credit cards are a dangerous thing for a lot of people. you dont really realise that untill you work in financial services and see people really, really get in trouble.

you dont realise how nasty the pokies are untill working in financial services either...

Surely, you can get in to just as much trouble with a debit card. Obviously, you can't spend money you don't have at the moment, but you can still spend all the money in your bank account and then won't be able to pay for things like rent, food, etc. so you are just as far up shit creek.

[obzelite]

my bank just refused to accept a bank cheque for $135,000 because the account is in my name and the bank cheque was in my wife and my name.


they make your life a headache even when u want to give them money

[sirhc55]

I have no credit cards at all but do have a Visa debit card. If a person with a debit card overspends on their own money they would have to have rocks in their head. To overspend on a credit is too damn easy IMO.

I trashed all of my cards including Diners and Amex for the pure and simple reason of wanting to only spend what I had and not what I did not have.

[ATJ]

I have no credit cards at all but do have a Visa debit card. If a person with a debit card overspends on their own money they would have to have rocks in their head. To overspend on a credit is too damn easy IMO.

Having used credit cards for nearly 30 years, I just don't understand that logic. If you can stop spending with a debit card, you can stop it with a credit card.

When I use a credit card, I don't use it to spend money I don't have, but simply for the convenience. If I don't have the money in the bank, or an ironclad guarantee it will be in the bank by the time the bill comes in, I don't spend it.

[jamesw]

lots of people are not eligable for credit cards, don't like monthly bills, etc.

credit cards are a dangerous thing for a lot of people. you dont really realise that untill you work in financial services and see people really, really get in trouble.

you dont realise how nasty the pokies are untill working in financial services either...

Surely, you can get in to just as much trouble with a debit card. Obviously, you can't spend money you don't have at the moment, but you can still spend all the money in your bank account and then won't be able to pay for things like rent, food, etc. so you are just as far up shit creek.

but surely you can do that with any debit or key card,

or simply by having your whole weeks pay sitting in your wallet.

it all comes down to discipline.

i dont understand the human mind. what i do know is although most people seem to be able to budget reasonably well, some people consistently get themselves into trouble on a fairly regular basis, regardless of what services they do or do not have.

however, a credit card or overdraft limit seems to allow people to get ridiculously indebted. i often see people who have been 5k+ into their limit for years on end... i doubt they will ever pay it off... paying 10-15% pa

[jamesw]

my bank just refused to accept a bank cheque for $135,000 because the account is in my name and the bank cheque was in my wife and my name.


they make your life a headache even when u want to give them money

theres a lot of case law and duty of care behind this.

if the cheque is made out to your wife, that means she OWNS the cheque. it's her money.

the bank account is in your name. that means you OWN the account.

$135,000 is A LOT of money. If you and your wife were having a marital dispute, or were no longer married, or even if your wife simply did not want you to have that money, she could successfully sue the bank for the amount of the cheque...

a lot of the time banks are giving you 'headaches' to protect your money.

imagine this scenario. you and your wife split up, you sell off all your assets, you get a cheque for 200k, she gets a cheque for 200k. somehow she comes along your cheque, takes it, and takes it to her bank. she deposits it into her account, then has another cheque made out, and then takes out the money as cash or a cheque and pisses off overseas.

your out of pocket 200k, you sue the bank, you win, the bank loses 200k.

[Geoff]

Wow...erm my can of worms was big

Thanks people

[sirhc55]

Woolworths, one of my major clients, always pays with a bank cheque - what really annoys me is that they could easily pay me by direct credit, but choose not to. Ah well, at least it is money in the long term

[gstark]

the bank loses 200k.

Seems more than reasonable to me.

[Grev]

I guess the rich knows how to squeeze every last bit they can from the banks.

[Reschsmooth]

I guess the rich knows how to squeeze every last bit they can from the banks.

I didn't think we had been talking about 'rich vs poor', but processing of bank cheques?

Regarding the comments about discipline and credit vs debit cards, if I was undisciplined, I would prefer to lose my money rather than lose my money AND someone elses (who has deep pockets and many lawyers).

Furthermore, I get a little tired when people keep blaming financial institutions when they get into serious indebtedness (I am not saying anyone here has said that...). Whilst credit is much easier to obtain now, no-one ever forces someone to actually spend it.

[jamesw]

the bank loses 200k.

Seems more than reasonable to me.

but the bank never loses money, they increase fees & charges so that their balance sheet balances....

[virgal_tracy]

You talk about credit being easy to obtain. The problem with banks to a certain extent is they want you to get in debt. That's where they make there money from the interest.

I have 1 credit card which has a $10000+ limit. This was the 1st card I ever had and had a limit of $1000. Not once have I asked for an increase. The bank always states that I am such a valuable customer that they will increase my limit.

Conversely I also have a Virgin cc (no fees) which I keep for emergencies (camera stuff the wife isn't to know about) and they have just sent me a letter stating that as I haven't used my card for a while it must be becuase my limit is too low and would I like to increase it.

For undisciplined people it is too easy to get extra money without any form of checks and balances from banks etc.

[Greg B]

Bank cheque related fraud is more common than you might think.

Also, amazingly, Bank cheques get lost all the time.

Many Bank Cheques are issued for property settlements, a settlement clerk
may be carrying around 40 or 50 or more Bank cheques at a time with face
values totalling millions of dollars. And there are many settlements every day.
Those cheques are handed over, sent to other people, all manner of things.
Some get lost!

There are certain limited situations where a bank will stop payment of a Bank
Cheque - the most common being where the cheque has been lost. Bank cheques
are not the same as cash, but have generally been issued against clear funds,
and will generally be paid unless the cheque has been reported lost or stolen
or destroyed. The days to clear is primarily to ensure that the Bank Cheque
has not been stopped.

The collecting bank (your bank where you deposit the cheque) will treat bank
cheques as unclear to enable the paying bank to advise that the cheque has
been stopped if that is the case.

As with many high volume transactional processes, the practices are designed
to reduce the overall risk and can be frustrating for individuals.

Geoff - probably the best way of looking at it is to equate processes to those
in the medical area where well established practices are designed to minimise
the possibility of something going wrong - even though the patient or others
in some cases may consider those practices unnecessarily tedious.

[Geoff]

Greg (and everyone) thanks for the insight into why. I just thought it was the banks and their greed. Hard not to hate the banks when you have a mortgage though

[sirhc55]

”The Lord giveth and the Lord taketh” - a balance, The banks, taketh and taketh

[jamesw]

if you dont like a bank, find a GOOD credit union that suits your needs. there are some shonky ones out there that are becoming much like a bank...

[Onyx]

Only way to make money from the banks is to own them... I just made 8.72% from trading a parcel of just 50 ANZ shares. In two weeks.