If you are anything like me you have probably wondered why, when you pay a check into your bank, it can take a while before the money is available for you to use.

Most of us think that we should be able to spend the money straight away. But, frustratingly, that is not the case.

The reason is obvious when we give it some thought.  There are people in this country who write a check in the full knowledge that they do not have sufficient funds in their checking account.  If the recipient were to spend the money right away, the bank would be liable to a great loss financially.

Let us have a look at the procedure the bank adopts when it receives a check.

bank check

When we write out a check to someone we immediately consider that money to be no longer in our bank account.   So we should, but in reality is is probably still there for a while. It can even be a few months before the money actually is deducted from your balance by the bank. Unfortunately we do not know how long it will take so it is not possible to make use of that money in the meantime. Only when the check gets to your financial institution do they deduct the money and “clear” the check.

So, what happens in between?

Let us assume that you write a check to someone and send it to them in the mail. When they receive it, it can be a few days or weeks before they visit their bank and pay the money into their account. That check is then sent to your bank to ascertain whether you have enough money to meet it. If you have not, the check will bounce so the money will never reach the recipient’s account.  Sometimes it can go back and forth between the two banks for a while while it keeps getting represented.

If the recipient were in a position to spend the money before it had cleared, then the bank would have to request a repayment from him. Who would ever like to do that. So this is why they have to wait until the check has been accepted by your bank. This gives them the security that they will never be liable for the money.

Now, I know that you would never write a check that would bounce but unfortunately there are individuals who try to take advantage of the banks. Some banks do allow you a certain amount of the money paid in sometimes. This is when the scammers would present cheques that they knew were either stolen or had been forged. They would then spend the portion that they had been allowed to use and when the check got sent back, the money would have gone from their account.

Another way the criminals found to defraud was to write a check which was in excess of the amount they owed. They would then contact the recipient and ask for a refund. Sometimes the recipient would issue that refund before finding out that the check had bounced. These scams are gradually being eradicated by the financial institutions now though so do not try them!!

Although internet banking has reduced the need for checks enormously, there are still a few individuals out there trying to benefit illegally. So my warning is, if you receive a check from someone, no not spend the money until it clears.

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