I have an insurance check I can cash the 18th. Here is the problem. It’s over $5000 and out of state. The banks want to hold it 10 days before they’ll cash it. The most they’ll give me up front is $100. In this digital age what’s the hold up? No pun intended. Is there anyway to avoid the hold?
Location might help.
I’m an American Living in Michigan. The check is from New Jersey.
You’ll probably discover that that is actually “up to” 10 days. I’ve deposited out-of-state checks which have cleared within a day or two. Electronic verification does nothing but tell the bank of deposit that the funds to pay the check are available now. That doesn’t mean the funds will be there when the check is presented for payment at the payer’s bank. So, the bank of deposit will hold the check (really they are holding the posting of the deposit amount to your account), until the payer’s bank actually pays out the amount of the check.
Until around 1984, banks were regularly restricted to operating in their home state. After that requirement dried up, banks merged and acquired one another with gleeful abandon.
If your insurance company banks with a large national bank, chances are there’s an affiliated branch in or near your hometown. They’ll cash the whole amount for you. If they bank with some tiny bank out in the middle of nowhere (a practice Cecil addressed in his second book, IIRC), their intention is to drag out the process of cashing the check and you’re stuck. Is it worth taking time off from work to drive out to their bank? Depending on your specific circumstances, it might be.
I’d recommend one of those check cash places, but not for a paycheck that large. But you could ask one of them, just to find out if it’s possible or worth your while.
Source: http://www.federalreserve.gov/pubs/regcc/regcc.htm
FWIW - The entire web page is worth a serious read.
It is up to your bank. Banks are mightly suspicious of people nowadays. They have the option of holding it “up to” 10 days but I have been lucky enough to find a bank (well, actually a credit union) that has an abnormally high restriction ($7,500 per check) with no hold. I can literally deposit $20,000 in multiple checks then immediately withdraw $20,000 cash. I guess the point is, shop around at banks or credit unions until you find one with a policy that you like.
If you simply hand the check over to the “next available teller,” you’ll get stuck with the maximum hold per that bank’s policy. If you’re a long-time customer, particularly one with no history of depositing bad checks, and if the insurance company is large enough that most folks would recognize the name, and if the check has some anti-forgery elements to it (like a watermark), taking the check to one of the “back at a desk” bank folks might result in a shorter hold. It’s worked for me on a couple of occasions. Can’t hurt to ask.
Are you sure it’s even a check at all? Many insurance payments are made by “commercial drafts” instead of a bank, cashier or company check. The difference wouldn’t be obvious. You’d have to specifically read every word on the face of the “check” to even suspect it wasn’t one.
I’ll leave it to someone more expert to explain the the details, but in rough terms, insurance companies often act as their own banks for settlements, just as auto rental companies often self-insure their cars. Why pay profits and fees to a third party institution, when you’re larger and do more business of this type than many of those third-party institutions? What can they offer you that you can’t offer yourself?
e.g. Hertz writes more policies, and more policy-days of coverage, backed by more corporate assets and escrow funds than most car insurance companies. Insurance and CDW are actually substantial parts of their business operations. You may or may not weigh the risks before lending your car, but for Hertz, it’s a dead certainty that there will be accidents, and other legal complications to their lending, every single day. 've forgotten where they stood among the nations auto insurers (and when – the situation is complicated by state and interstate laws, local franchising and other situations), but they are defintiely up there with the Big Boys.
An interstate commercial draft isn’t covered by many Federal banking regulations, nor will it benefit from the ‘courtesies’ banks afford one another. A commercial draft may be just as “good for the money”, but insurance companies operate under different regulations, and lie outside the banking industry’s mechanisms of resolution in the event of a conflict, forged or unauthorized check, etc.
How long the bank holds the check for clearance depends on where the check was drawn AND the amount of the check. Some banks will even release partial amounts for withdrawal up until the final clearance date.
Here is the logic: You present the check for cashment. Your bank sends check to local clearing house; local clearing house sends check to its “home” clearing house; home clearing house sends check to drawee bank; drawee bank checks for any stop-payment orders and debits the issuer (the insurance company); final settlement is made (go in reverse order down the line); and finally, you get paid. Along the way, each party, including the issuer, must have at least one full day to protest payment or correct an error (i.e., misrouted check).
If everything goes off without a hitch, your money is actually available to be paid to you before the 10-day period and most banks will release it into an ordinary checking account at that point. If you deposited the funds into another type of account, other rules may apply. For instance, a bank can insist on notice to remove large sums from a savings account or other types of interest-bearing accounts.
I just looked at the check. I refuse to say checked the check. Wait I just did. :smack:
Anyway It’s a check all right. It goes to Fleet bank in Connecticut. I got all excited becuase I thought I remembered commercials for them so there must be one near. Turns out my memory of the commercials was just as good as my memory of state it was in. The closest one is in New York state near the Canadian border. I’m thinking about taking a drive over there. I’d get to see a forien country for a few hours. That would be neat.
If there’s one thing I’ve learned about our nation’s banking system, it’s that there is nothing simple about it. Only your bank knows for sure why they’re keeping your money. But make no mistake, they are entitled to do so.
As ** Duckster** mentioned earlier, Regulation CC is the Bible when it comes to funds availability. The first two digits of the routing number on the check tell you what Federal Reserve District the issuing bank is located in (assuming the issuing bank is in the US). If the issuing bank is in a different district than your bank is in, your bank may withhold funds for up to ten business days. This appears to be your situation, hence the delay.
If the issuing bank is the same as the bank of deposit (an “on us” check), funds will generally be available the next business day. If the issuing bank is different than the bank of deposit, but in the same Federal reserve District, funds will generally be available in three business days. These holds are protection for the bank, to protect against check kiting, and other fraud, as well as to make sure that sufficient funds are on deposit at the issuing bank to cover the check.
There are other reasons why holds may be placed. New accounts, accounts that have had too many overdrafts, and accounts with suspicious or fraudulent activity usually have holds placed on them. In the first two cases, the bank will let you know what is going on. If you are suspected of fraud, they will not necessarily let you know. I once had an interesting phone conversation with a customer who wanted to know why he couldn’t get his money. It was comical, the way I tried to avoid saying “the bank thinks you’re a crook, sir.” His account was frozen while we waited for the police to arrest him.
Reg. CC was actually intended to protect bank customers, not inconvenience them. In the old days, banks could place holds on accounts for as long as they wanted. If you were rude to a teller, you might not see your money for weeks.
Banks in which funds are being deposited send the physical check for settlement via third party clearinghouse exchanges, the Federal reserve Bank or Branch in their District, or to the issuing bank directly. The holds are intended to allow sufficient time for processing and settlement, etc. Modern secure electronic communications have pretty much rendered the need for this hold time unnecessary, but it’s still with us. However, the Fed is encouraging banks to move to electronic processing of checks, which may one day speed the whole process up (hopefully).
Cites? See Duckster’s link above or visit http://www.federalreserve.gov/ or http://www.frbservices.org/index.html.