SUBMITTED: Friday, July 16, 2004
POSTED: Friday, July 16, 2004
First of all, you need to understand that items are processed to/from checking accounts in blocks of one “business day”. While the specific times of that business day has changed over time, for US Banks here in the Minneapolis/St. Paul markets, the cut-off time it 6:00pm )as recent as a year ago, that time was 3:00pm). As an aside, each bank has a “cut-off/cut-over” time. The banks do this so that they can ensure that they can complete the processing for all the items (debits and credits – note to everyone here, credits are always posted first – for EVERY bank) that are posted to all of their checking accounts.
Now, this 6:00pm cut-off time is for transactions that occur at a branch office or at an ATM. Remember, with regard to funds availability (which I'll address in a moment) that the ATM has no idea what you've just deposited. Because we have so many banks in our market here in the Twin Cities and because they all face the same challenge of getting every item “posted” as appropriate, they often have mutual agreements to accept these “same day” transactions much later (i.e. US Bank and Wells Fargo go all the way to midnight). In addition, many of the bills you pay (and the merchants you do business with (i.e. Wal-Mart, Target, CUB, Rainbow) actually have your payment sent directly to a bank processing center. In the case of bills, you're not really sending the check to Xcel Energy but to the bank where your item will be deposited! For places like Wal-Mart and Target, the check that you write there could be included in a deposit that get taken directly to the bank – sometimes within hours of you writing it!
Now, with regard to the whole funds availability thing. There are specific regulations that govern how a bank may/may not make deposited funds available to use. Generally, there are three transactions that are generally exempt from any kind of delayed availability and those are cash deposits made at a teller window, wire transfers and direct deposits. These are cases where the bank actually has the money in hand and has no reason to delay its availability to you. In the case of deposited checks however the bank doesn't actually have the money that it represents until the item is ultimately paid by the bank upon which it is drawn. So, in a sense, if banks made deposits available immediately (some still do, but it is becoming less common), they would actually be letting you use money that they don't even have yet. There's an inherent risk there because if an item you deposited is returned and you've spent the money, the bank really has no recourse but to let your account become overdrawn and to hope that you would pay it back.
Sadly, there are instances where the customer can't pay the bank back and, more often, there are instances where the customer WON'T pay the bank back. This is one key place where check fraud occurs and costs banks billions of dollars each year. So, banks have moved *some* of the risk on the customer who deposits the check (and who legally takes responsibility for the item) while they, for the most part, retained most of the risk. In the case of US Bank, except for the types of deposits I've mentioned above, generally makes the first $100 of each day's total deposits available immediately with the remainder available the next business day.
Of course, banks are in the business to make money and they want to retain their customers, so they must continuously adjust their operations to strike a balance between risk and customer service. Most often, though it isn't always apparent to the customer, the benefits to the customer are far greater. Unfortunately, when it does it the customer it's not always pretty. Couple that with my earlier post about banks being required to be consistent and it's a tough balancing act.
Finally, coming later this year, most banks are participating in “Check 21” – a new way in which items will be put through the system. In these cases, a deposited check will be imaged and converted to an electronic file that will instantly be “sent” to the bank upon which it is drawn for payment. Remember that bill that you write a check for where the company is located in, say, California? It used to take about 4 – 6 days to hit your account but now it will take just 2!
I hope that helped to make things a little more clear to you. If it makes you feel better, bank employees are held to an even higher standard and we rarely, if ever, get cut slack on fees!