Why do banks hold checks for 5 business days?

Question

I write a check and give it to the payee - they deposit it and the money goes out of my account very quickly. However it does not arrive in the payees account. The banks says "it takes 5 business days for checks to clear".

What is happening with the money during those 5 days? its not in my account. its not in the payees account. So I can only assume the banks are holding it, lending it out and generating interest on it. The payee doesnt get any interest on it, and neither do I. Its MY money.

I think the banks are THIEVES!!!!!

what verification? the money is already gone from my account!!! So its been verified. Why does it still take 5 days to get to the payee? They should not need to be verified.

What the bank is doing is following Regulation CC that allows banks to delay access to the funds on a check deposited by a client. There are several reasons banks do this:

1. The client has a new account that is less than 30 days old.
2. The amount of the check is larger than the average balance kept in the client's checking account.
3. The client has overdrafted their account several times within a 6 month period.

Thats just excuses.

The payees account is several years ago, it has never been in overdraft and so what of the check amount is larger than usual - as long as the money is there, it should be processed ASAP.

I'm not saying to not hold the check at all - but if it takes only 3 days to ensure the funds are available - then fine in 3 days the funds should be made available. The bank should not be holding on to the funds for an extra 2 days just to get the interest.

Answer 1

The main reason banks take 5 days to clear a cheque is that it is earning them interest during that time. It is a huge source of income for them.

They are facing a lot of criticism on this, but they are fighting tooth and nail.

Answer 2

What the bank is doing is following Regulation CC that allows banks to delay access to the funds on a check deposited by a client. There are several reasons banks do this:

1. The client has a new account that is less than 30 days old.
2. The amount of the check is larger than the average balance kept in the client's checking account.
3. The client has overdrafted their account several times within a 6 month period.

These are just a few reasons that a check will be placed on hold. The biggest reason that the bank does this is to ensure beyond a shadow of doubt that they have done everything they can do to collect the funds before releasing them to the client. It is nothing personal against the client, it is something that the banks have learned to do over the last century because of all the fraud that has happened to cause them to lose money. It also helps protect the customer. Let me give you a couple of scenarios:

1. Mr. Smith deposits a check for $5000 and the bank does not place a hold on the funds. Mr. Smith withdraws the funds from his account the next day and closes his account. The check returns a few days later because it is fraudulent. Mr. Smith is long gone and the bank is out $5000.

2. Ms. Garcia deposits a check from her insurance company for $1000. She only has $100 in her account, but the bank does not hold the funds. She uses the money the next day to fix her car. The check comes back because it has a stop payment on it. Ms. Garcia's account is charged for the $1000 and it causes her to go into the negative.

These are just a couple of things that could happen if the bank does not place a hold. It is hard for clients to understand why the bank does this because they think the bank just wants to give them hell. What they don't realize is that the bank is trying to protect the client and themselves at the same time. If the bank never placed holds on deposits, then it would cause more and more fraud which would cost the bank money. This, in turn, would cause the bank to have to charge higher fees.

Please don't take this personally. The bank is not trying to make you or your payee's life harder. The real people to blame are all those people out there who spend their time trying to defraud the bank. These are the real thieves. These people are always finding new ways to get money that is not owed to them and the banks are constantly trying to figure out ways to keep this from happening.

Answer 3

What do you mean it's not in his account? If he deposited it in his account, it will show up as being in his account. It is possible that the funds are not available yet as the bank doesn't have to let him use them for up to 5 business days if it has not cleared your bank.

If you wrote someone else a check, it's not your money anymore so your statement of "it's my money" is a bit over the top.

You're making some sort of weird assumption that when you hand someone a check that his bank immediately calls your bank on the phone to clear the check. They don't. All checks go through a clearing house. The funds will be available to him when they clear. If it clears the next day, then he should be able to spend them the next day. However, his bank must make them available to him within 5 business days. That is a federal law. Look it up and blame your senator if you want. Maybe your senator is the thief rather than your bank.

Answer 4

I hate when this happens when depositing a check into my account that is from a business. Sometimes if the other person pushes it, they can get their bank to verify the funds so that some (if not all) can be made available. The bank does this so that if the funds are not in the account, then they are not out of any money. The are probably lending the funds out and getting interest on it whether or not it is in your account

Answer 5

That's true... banks also operate by calculating a day's debit then adding credit, so even if you put an extra $100 in to cover $5 over what you had in the bank that morning, the bank will STILL charge you an overdraft fee, even though you have $95 sitting in the account. They take the largest payment first, too... so if you made several small transactions with a debit card, all of them will come back to hit you with $30 of "over the limit" fees. (That's part of why I use a credit card for everything.)

Answer 6

I beneficial wish you probably did not cord any of this a refund to whomever sent you those money grams. i'm hoping you probably did not spend a dime of this money which you put in the economic institution. Why? given which you have been scammed. those 2 money grams are counterfeit and could be found out until now the tip of April. Then the economic institution will come returned on you and choose you to place back any money you spent of those 2 money grams. this awareness get entry to interest rip-off is simple.

Answer 7

its for verication purposes...