# Long time for funds from checks to clear: why? **URL:** \ **Category:** Factual Questions\ **Created:** [July 7, 2004, 8:42pm UTC](https://boards.straightdope.com/t/long-time-for-funds-from-checks-to-clear-why/254004 "2004-07-07T20:42:37Z")\ **Posts on this page:** 5\ **Page:** 1
**Author:** ![rngadam](https://avatars.discourse-cdn.com/v4/letter/r/97f17d/32.png) [@rngadam](https://boards.straightdope.com/u/rngadam)\ **Post date:** [July 7, 2004, 8:42pm UTC](https://boards.straightdope.com/t/long-time-for-funds-from-checks-to-clear-why/254004/1 "2004-07-07T20:42:37Z")
My 600M$CAN-net-profit-last-year Canadian bank has this in it’s Banking Agreements: > [@](#): > > # When you deposit a fully encoded cheque drawn on a financial institution’s branch located in Canada, we may apply a “hold” for a maximum of 10 calendar days, before you are able to withdraw the funds. This is to make sure that the deposit clears. > > # When you deposit an unencoded or partially encoded cheque drawn on a financial institution’s branch located in Canada, we may apply a “hold” for a maximum of 15 calendar days, before you are able to withdraw the funds. This is to make sure that the deposit clears. > > # When you deposit a cheque drawn on a financial institution’s branch located outside of Canada, we may apply a “hold” for a maximum of 30 calendar days, before you are able to withdraw the funds. This is to make sure that the deposit clears. On June 30th my wife made a large ATM check deposit from another bank that has it’s branch in the same city. Today, July 7th (a week later), we’ve tried to transfer this money elsewhere. We were told that these funds were on “hold”. After bitching 30mn about it by phone to our bank to 3 different persons up-to an assistant manager, the “hold” was finally removed. Now, what the hell is going on here? Can someone explain to me why, in 2004, it takes “up-to” 10 days for a check to go from the ATM, to the hand of a bank employee, to a potentially near instaneous computer-check of fund existence in the other bank? How can they justify this? It is not like they are transferring the actual money by truck, right? Can someone that has worked in a bank explain to me what in the process is taking so long? At minimum, I find it gross incompetence that banks don’t have the electronic systems to verify quickly if the funds were really in the original bank. From my research on this, and based on the Payment Clearing and Settlement Act [http://www.cdnpay.ca/publications/pdfs\_publications/cpa\_act\_chap\_c21.pdf](http://www.cdnpay.ca/publications/pdfs_publications/cpa_act_chap_c21.pdf) I found that the actual governance of inter-bank transfer is left to the Canadian Payments Association: [http://www.cdnpay.ca/about/governance\_legislation.asp](http://www.cdnpay.ca/about/governance_legislation.asp) And I finally found this very interesting document that talks about imaging all checks but also explains the current process: [http://www.cdnpay.ca/publications/pdfs\_publications/imaging.pdf](http://www.cdnpay.ca/publications/pdfs_publications/imaging.pdf) > [@](#): > > How are cheques processed today? > In the Canadian clearing system today, paper-based payment items, primarily cheques, are exchanged between financial institutions daily at six regional settlement points across the country. At each settlement point, cheques are exchanged between up to twelve Direct Clearers (major financial institutions who may also act as a clearing agent on behalf of other financial institutions, known as Indirect Clearers.) > > The process begins when a customer deposits a cheque at his/her branch. Near the end of the day, that branch’s cheques are bundled, totaled and sent by air or ground courier to the regional processing centre for that financial institution in one of six cities across the country. A similar process is in place for cheques deposited at Automated Teller Machines (ATMs). > > At the data centre, the amount of each cheque is encoded on it in magnetic ink to facilitate automated processing. Then cheques are passed through high-speed readers and sorted based on the financial institution holding the accounts on which they have been written. Once the total number and value of the cheques has been confirmed, they are bundled once again and then transported to another processing centre that serves the financial institution of the person who wrote the cheque. There the items are unbundled and processed again through a high-speed reader to verify the number and value of cheques received. Next the cheques are put through the machine again to sort them based on the branch that holds the account on which the cheque was written. Depending on the financial institution’s internal processes, the cheques may then be shipped to the various branches. And if a cheque cannot be honoured (for example, due to insufficient funds or a stop payment order), it retraces the entire journey back to the branch where it was initially deposited. > > This entire process may involve processing a paper cheque through the reading and sorting machines up to eight times and transporting it up to four times. I still don’t understand HOW (especially from branchs of different banks but in the SAME city) this process should take more then 3 days. Would it be possible then to have the CPA by-laws changed to force financial institutions to reduce this limit from 10 to 3 days, even pre-imaging? And to post-imaging at less then 24 hours? What about other Canadian banks? What about other banks in other countries? Are the same delays applicable everywhere in the world? Is there anywhere where they do a better job then here? ---
**Author:** ![erislover](https://avatars.discourse-cdn.com/v4/letter/e/71e660/32.png) [@erislover](https://boards.straightdope.com/u/erislover)\ **Post date:** [July 7, 2004, 9:11pm UTC](https://boards.straightdope.com/t/long-time-for-funds-from-checks-to-clear-why/254004/2 "2004-07-07T21:11:37Z")
Ten days! Wow. I thought three to five days was bad. I don’t understand why they always process withdrawls first, then deposits, other than to make sure they can extort more fees from those of us living on the edge… 😉 ---
**Author:** ![gotpasswords](https://avatars.discourse-cdn.com/v4/letter/g/c57346/32.png) [@gotpasswords](https://boards.straightdope.com/u/gotpasswords)\ **Post date:** [July 7, 2004, 11:59pm UTC](https://boards.straightdope.com/t/long-time-for-funds-from-checks-to-clear-why/254004/3 "2004-07-07T23:59:07Z")
Does seem like Canadian banks take a long time to process checks and clear them. With luck, you’ll be getting a “truncation” system like our new “Check 21” (Checking for the 21st Century, or some such name) where checks are imaged and cleared at the point of entering the system, rather than at the tail end, as they get back home, so to speak. They get converted to electronic items and the physical check is destroyed (truncated) Once that’s done, they’re presented electronically to the check-writer’s bank as if they were a debit card transaction and the money is immediately taken from the writer’s account. Some stores are doing this, in addition to banks - WalMart was a pioneer in this program - they do the imaging in the stores (or regional centers). Buy something from WalMart at the right time of day, with respect to when they collect checks from the registers and image them, and your check just might clear your bank before you get home. ---
**Author:** ![silenus](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/silenus/32/166_2.png) [@silenus](https://boards.straightdope.com/u/silenus)\ **Post date:** [July 8, 2004, 12:21am UTC](https://boards.straightdope.com/t/long-time-for-funds-from-checks-to-clear-why/254004/4 "2004-07-08T00:21:53Z")
You have to realize that it is not in the bank’s interest (pun intended) to clear your checks any faster than they absolutely have to. The ten days it takes to “clear” a check means they have the use of your money, free, for that time. Do this to every customer, and becomes crystal-clear how they turned a $600M profit last year. ---
**Author:** ![rngadam](https://avatars.discourse-cdn.com/v4/letter/r/97f17d/32.png) [@rngadam](https://boards.straightdope.com/u/rngadam)\ **Post date:** [July 8, 2004, 12:41am UTC](https://boards.straightdope.com/t/long-time-for-funds-from-checks-to-clear-why/254004/5 "2004-07-08T00:41:03Z")
> [@gotpasswords](#): > > Some stores are doing this, in addition to banks - WalMart was a pioneer in this program - they do the imaging in the stores (or regional centers). Buy something from WalMart at the right time of day, with respect to when they collect checks from the registers and image them, and your check just might clear your bank before you get home. Yes, one the document I linked talked about a very similar system to what you are describing. And since it will be done by the CPA, it means that every bank is going to be using it by 2006. Is every banks in the US (I suppose you are talking about the US) already doing this? Or is it very variable? But I wonder if once they do have imaging of checks in place for Canada, are they really going to lower the time it takes for the funds to clear? I also thought as Silenus that their motivation might not be so much as to protect us from fraud than making sure that the money stays still a bit longer so that they can make money off it…