Banking issues

[Psyber]

In view of the class action being brought by Maurice Blackburn over bank fees I thought my experience today was topical.
I'd written a cheque mid to late afternoon yesterday and since I was busy transferred the funds to cover it today, since I understood funds were not immediately transferred.
So, I was a little surprised when I discovered I'd already copped an Honour Fee.

I emailed my manager at the Adelaide head office and he reversed it, but said this:

If a cheque is banked the day you issue it the funds will be debited from your account in overnight processing. The beneficiary of the cheque cannot access these funds for 3 working days in the event the issuing bank dishonours the cheque due to insufficient funds, stop payment etc....the following day. So in theory, if you write a cheque out sufficient funds should be in your cheque account the same day to ensure the account does not overdraw.

I replied:

Thank you, I'll bear that in mind.
I'd assumed it would naturally work the same both ways, and that transfer out of one account into the other would occur simultaneously after the checks..
After all, at that point it is purely electronic..

The operating scenario you describe does, however, raise the question of who gets or is entitled to the interest on the money while it is in limbo.
There would be quite a lot in suspension on any one day, and I wonder if it has ever been looked at...

I wonder if the recipient of the funds gets the interest or whether it goes sideways to the bank?

[Q.]

You've answered your own question - sideways to the bank!



Of course, I have no proof of this

[Psyber]

At least I got my "Honour Fee" back...

[Footy Chick]

Calling Dutchy or Riddler to thread!

[Squawk]

Banks put the money on the short term money market I think. It really peeves me when they wont clear a Reserve Bank cheque or standard bank cheque for 3 days, as they are using your money as a 'short term loan' to themselves.

[brent-83]

Banks put the money on the short term money market I think. It really peeves me when they wont clear a Reserve Bank cheque or standard bank cheque for 3 days, as they are using your money as a 'short term loan' to themselves.

Then join somewhere that will.

The FI that I work for (IT not Banking so I can't clarify the short term thing) clears all bank cheques and reserve bank cheques instantly.

[mighty_tiger_79]

out of interest, just how much interest do banks make on a cheque before they clear it???????

[Psyber]

out of interest, just how much interest do banks make on a cheque before they clear it???????

Probably not much on each - if they do keep it themselves rather than pass it on to the rightful recipient - but the large number of transactions probably means a large total.

[smac]

Check if your account pays interest on the "current" or "available" balance. Current balance = getting interest while waiting for a deposited cheque to become available. Available balance = bank getting interest at the expense of the customer.

[Dutchy]

When you deposit a cheque to your account there is the 3 days to clear the cheque, however you earn (or save if an OD) interest from Day 1 (the day of deposit), you simply cannot draw against the funds in case the cheque is dishonoured which would leave the bank out of pocket.

Surprised some think banks could get away with holding funds (billions of $$$) without paying interest for 3 days...

Psyber - the other trick is to handover the cheque after bank hours therefore cannot be physically banked until the next day when you make your deposit

[PhilH]

Something else to bear in mind re cheques is govt legislation (Bills of Exchange Act from memory) that means a cheque needs to be physically presented to the bank being drawn on before funds can be clear.

Used to be five working days, now three. Yes still too long and hence why electronic transfers have taken over but if you need to present the cheque, time for it to be paid / dishonoured and time for it to be returned I can't see it ever being shorter than 3 working days.

Over time technology will make cheques redundant.

[Choccies]

I worked at the Reserve Bank for 13 years and 3 times a day we used to go to the 'Clearing House' with the 5 major banks and a couple of other minor banks to exchange cheques for clearance. These are cheques we took as deposits in that day that we cleared back to the issuing bank and reconciled the values of those cheques. Now this basically happened overnight so from a cheque clearance point of view the majority of the cheques were available and legitimate to be cleared that night. A small percentage get dishonoured for various reasons and that is why the banks keep this 3 day window to cover themselves. From the point of view of the cheque values the banks 'exchange' these values as well but I'm not 100% sure what they did with these $ values, whether they had them on the Short Term money market or whatever I cant remember.

But the 3 day clearance period is purely from a point of view of covering themselves for dodgy cheques.