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Let's get this Clear
It's the 21st century, yet banks can take a week
to process our cheques!
Up to 8 million cheques worth billions of pounds
pass through the clearing system every day. But for
all the talk of high speed and real-time banking,
some institutions can move like a tortoise when it
comes to getting your hands on your cash.
How it Works?
When you pay a cheque into your account, it will take
three days to switch between the cheque writer's bank
and your bank unless both are the same.
Day1:
The cheque is sent to your bank's clearing centre.
From here, the information on the cheque is sent electronically
to the cheque writer's bank's clearing centre.
Day2:
The cheque is then sent by road from your bank's clearing
centre to a central exchange, usually based in London,
where it is handed over to the cheque writer's bank.
Day3:
The cheque writer's bank checks there is enough cash
in the customer's account. If there is, the money
is paid to your bank; if not, it will bounce and returned
in post.
But do not expect to get your hands on your money
straight away. Cheques actually have two clearing
dates -the first is "value date" where you
first start earning interest on the money you have
paid in. The second is "cleared date" -the
time you can withdraw the money you have paid in.
Who is in Charge?
Cheque clearing is managed by the members of the Cheque
and Credit Clearing Company, under the umbrella of
the Association for Payment Clearing Services (APACS).
The big four banks, Barclays, Natwest/RBS, Bank of
Scotland, HSBC and Lloyds TSB, control almost 70%
of APACS. All members are responsible for processing
customer cheques.
Non-members, such as building societies, still provide
cheque paying and drawing facilities, but have to
obtain indirect access to the system by paying fees
to member banks -so therefore member banks have little
incentive to speed up the process because of the extra
interest they can make on customer cheques and fees
from non-members.
How Long does it take?
Most people expect a cheque to clear around three
days, but many banks can hang on to your money for
much longer and refuse to pay interest from day one.
This could mean a big boost to their profits each
year because they invest your money and earn interest
on it -while you miss out. Different banks will have
different policies on this.
Internet banking does not mean fast cheque clearing
times either. If you want to pay in cheques or transfer
funds between banks, it can still take three or four
working days.
The Fastest
The normal way to get your hands on your money the
same day is through the clearing house automated payment
system (CHAPS). You will have to pay £25 for the privilege
of drawing on your cheque the same day.
The Bankers Automated Clearing System (BACS) is one
of the most frequently used electronic systems. It
includes standing orders, direct debits and salary
transfers, free of charge. But the process still takes
three days.
The Worst
Cheques paid into savings account can take even longer
to clear and earn interest.
The worst is the National Savings which takes two
weeks to clear a cheque into its ordinary saving account.
Interest is then payable only on the first day of
the month after you have paid in the cheque -so in
theory you could wait more than four weeks for interest
to kick in. As for building society savings account,
it could take up to ten days for a cheque to clear.
This article is for information only based on facts.
Money Matters Site recommended: www.thisismoney.com
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