Can somebody explain something to me re: overdrafts? (m)

[Kari]

At other websites I read, there is frequent debate about overdraft fees. Apparently, people have the experience of depositing a check, believing the funds are available once deposited, and then having checks written against those funds bounce because their bank placed a hold on the funds for a couple of days/week.

Here's what I don't understand - and keep in mind that I can't even tell you the last time I've had to personally deal with anything related to a checking account, so I'm truly clueless about this - what would happen if a person walked into their bank with a check and instead of depositing the check, they actually cashed it? Couldn't they then turn around and deposit the cash into their checking account? Or do banks not cash checks anymore - are you only allowed to deposit them? What about that line on the deposit slip that indicates how much cash you'd like back from a deposit of checks - do they still allow that?

On the one hand, I think it sucks that somebody who writes checks in good faith against money they deposited in their account could inadvertently accrue several overdraft charges. OTOH, the upcoming legislative changes that will limit the amount that banks can charge in overdraft fees is already having anti-consumer effects.**

So, what's the scoop? Is there a way to workaround the "hold" period by cashing a check instead of depositing it?

(**A large regional bank based in my state, which pioneered the concept of "free checking" 20 years ago, announced last week that they are discontinuing free checking because of the restrictions on overdraft charges. Sucks for low-income people who can't afford the $10/month fee for a regular checking account....)

[mowse]

No, you can't cash the check and turn around and deposit the cash. At least not where I bank. In order to cash a personal check, you need to have the funds to cover it in your account. So basically, they ARE still putting the hold on the check and you are then making a withdrawal for the amount of the check. And if you want cash back from a deposited check, you must have those funds already available in the account. This only applies to non-payroll checks. If I deposit a payroll check, they cannot place a hold.

This policy has bit us in the backside several times, usually because the teller entering the check didn't know what they were doing! Our credit union does not place a hold on checks from AFLAC, for example. We had a large claim and the teller treated it as a regular insurance check and put a hold on it. We didn't know and went about purchasing. We had money in our account equal to the check so as we made purchases, they went through. Come Monday, when a bill came through we had close to $250 in overdraft fees!

Or there's the idiocy of their mandatory 5 day hold on all out of state personal checks. BUT they also say the first $100 will be available the next day. So my mom writes me a check for $50 and I have to wait til the next day to have the funds.

Our credit union also places a mandatory 5 day hold on all rapid refund tax checks. It really makes no sense to do a rapid refund if you bank where I do! you might as well e-file and direct deposit.

The whole thing with holds has to do with the patriot act and not individual bank policy.

The only way to work around the hold period is to find one of those check cashing/title loan places that charge you a fee for cashing the check OR take the check to the bank it was drawn upon and cash it there.

[Chryse]

On the one hand, I think it sucks that somebody who writes checks in good faith against money they deposited in their account could inadvertently accrue several overdraft charges. OTOH, the upcoming legislative changes that will limit the amount that banks can charge in overdraft fees is already having anti-consumer effects.**

So, what's the scoop? Is there a way to workaround the "hold" period by cashing a check instead of depositing it?

(**A large regional bank based in my state, which pioneered the concept of "free checking" 20 years ago, announced last week that they are discontinuing free checking because of the restrictions on overdraft charges. Sucks for low-income people who can't afford the $10/month fee for a regular checking account....)

This really bothers me. The banking industry needs some severe restructuring and new regulations until it has no choice but to be "pro consumer", if you will.

[Kari]

Wait - so it's a government policy for banks to hold checks? For security reasons?

So the government sets a regulation that banks have to follow...and the regulation (holding checks) helps spur the spike in overdrafts (and accompanying fees) over the past few years....and people rail against the banks? (Not you, Micki, but it is a HUGE sentiment that I run into a lot.) So now the government is also putting limits on overdraft fees....so banks are responding by cutting back on things like free checking accounts....and, again, people are blaming the banks.

sigh.

[Kari]

But that's just it. Banks are in business to make money. Even with regulations and restructuring, banks will still be in the business of making money. They will just be forced to find different ways to make it. Again, as I said in the strategic default thread, I think that ultimately it will be the people in the middle/working classes who will absorb the brunt of the fee shift.

The demise of free checking is just the first domino to fall, I think.

[Bonny]

I use that bank. There hasn't been much free about their "free checking" for the last several years, really, other than the name. (And, fwiw, at that partiacular institution, I believe there are holds on even payroll checks, too). So to put a cap on their almost $40 overdraft charge, what are they changing about their "free checking?"

[Vicky]

There is a regulation, Regulation CC, that does govern the availability of deposits. It was put into place to make sure that deposits are made available in a reasonable length of time and to avoid the placement of unnecessary lengthy holds merely at a bank's discretion. Banks CAN, however, place holds on deposits until they receive the funds from the paying bank or at least information from that bank that the item will be paid.

Reg CC is manipulated by many dishonest people in all kinds of scams that you find on Craig's List and on job search sites - someone here's husband came across that in his job search and we see it ALL THE FREAKING TIME at the bank where I work. Basically, they send you a check and ask you to send a portion of it back in the form of secured funds, i.e. a money order, and you can keep the rest. Because of Reg CC banks often make funds available before they have heard from the paying bank that the check is good. These checks are often written on forged or stolen checks and they come back after the money is gone from the account already, most times overdrawing that account and leaving the account holder liable. Remember, holds are put into place to protect the consumer, too, not just the banks. You should never spend funds until you are sure they are available to spend - don't assume anything. If your bank places too many holds that you think are unfair (on payroll checks, for example), then change banks, because they don't all do that.


Wait - so it's a government policy for banks to hold checks? For security reasons?

So the government sets a regulation that banks have to follow...and the regulation (holding checks) helps spur the spike in overdrafts (and accompanying fees) over the past few years....and people rail against the banks? (Not you, Micki, but it is a HUGE sentiment that I run into a lot.) So now the government is also putting limits on overdraft fees....so banks are responding by cutting back on things like free checking accounts....and, again, people are blaming the banks.

sigh.

Deposit holds shouldn't cause overdrafts if the account holder checks on the availability of funds before spending them. A quick call to telephone banking or a visit to the online banking site would give you this info if you don't have time to go to a branch. The rest of what you said about holds I have addressed above.


No, you can't cash the check and turn around and deposit the cash. At least not where I bank. In order to cash a personal check, you need to have the funds to cover it in your account. So basically, they ARE still putting the hold on the check and you are then making a withdrawal for the amount of the check. And if you want cash back from a deposited check, you must have those funds already available in the account. This only applies to non-payroll checks. If I deposit a payroll check, they cannot place a hold.

It is called recourse. The check is not drawn on your bank and so your bank has no way of knowing if it is good or not. It is a standard policy for banks, and has been ever since I started banking 30+ years ago - nothing new. Some banks make regular payroll checks available immediately, some don't. It's an individual policy.


This policy has bit us in the backside several times, usually because the teller entering the check didn't know what they were doing! Our credit union does not place a hold on checks from AFLAC, for example. We had a large claim and the teller treated it as a regular insurance check and put a hold on it. We didn't know and went about purchasing. We had money in our account equal to the check so as we made purchases, they went through. Come Monday, when a bill came through we had close to $250 in overdraft fees!

I hope they refunded those fees if it was a bank error!


Or there's the idiocy of their mandatory 5 day hold on all out of state personal checks. BUT they also say the first $100 will be available the next day. So my mom writes me a check for $50 and I have to wait til the next day to have the funds.

Again, the bank does this to make sure the check will be paid. Not all banks do this - mine doesn't. Another bank I do business with DOES. The check has to post before the funds are available unless it is drawn on the same bank, and that's why you would have to wait until the next day for the funds.


The whole thing with holds has to do with the patriot act and not individual bank policy.

The only way to work around the hold period is to find one of those check cashing/title loan places that charge you a fee for cashing the check OR take the check to the bank it was drawn upon and cash it there.

As I explained above, it has nothing to do with the Patriot Act. Another solution, Micki, is to find another bank. Yours doesn't sound like it meets your needs at all!


But that's just it. Banks are in business to make money. Even with regulations and restructuring, banks will still be in the business of making money. They will just be forced to find different ways to make it. Again, as I said in the strategic default thread, I think that ultimately it will be the people in the middle/working classes who will absorb the brunt of the fee shift.

The demise of free checking is just the first domino to fall, I think.

Yes, banks are businesses and not charities. I am glad to see the fee structures change, though, as I have heard some terrible stories about how fees have been abused by banks. My bank is changing their policies ahead of the game, before the new regulations take effect and I am REALLY glad to see this. Our fees were not as outrageous as some and we had limits previously, but now I think things will be much more fair to the consumer. We will still be offering free checking.

[Rosemary]

You can deposit a check, if the check is drawn on the bank you are depositing it, you can deposit it as cash, although to be safe you have to specify. If it is not drawn on the bank you are depositing it in, you can cash it, as long as you have enough $$ in there to cover the hold. At least that is how it works here, and pretty universally, because I do this stuff for clients are various banks.

At my bank, my own personal experience has been that my bank, at least for me, the few times it happened, has honored the deposit, even though there was a hold. One time in particular I remember I deposited a check from Fidelity and had to make a big tuition payment. If you looked at my account online, once they cashed the check, my account was in the negative, but they honored it and did not charge me any fees or bounce. I'm not sure if that is their policy, or if with certain accounts, or certain $ limits...but I'd say I had this happen twice. In both cases, had they charged me, it would have been my fault technically, as on the deposit ticket, it did state when the funds would be available, in those cases I just didn't pay attention.


At other websites I read, there is frequent debate about overdraft fees. Apparently, people have the experience of depositing a check, believing the funds are available once deposited, and then having checks written against those funds bounce because their bank placed a hold on the funds for a couple of days/week.

Here's what I don't understand - and keep in mind that I can't even tell you the last time I've had to personally deal with anything related to a checking account, so I'm truly clueless about this - what would happen if a person walked into their bank with a check and instead of depositing the check, they actually cashed it? Couldn't they then turn around and deposit the cash into their checking account? Or do banks not cash checks anymore - are you only allowed to deposit them? What about that line on the deposit slip that indicates how much cash you'd like back from a deposit of checks - do they still allow that?

On the one hand, I think it sucks that somebody who writes checks in good faith against money they deposited in their account could inadvertently accrue several overdraft charges. OTOH, the upcoming legislative changes that will limit the amount that banks can charge in overdraft fees is already having anti-consumer effects.**

So, what's the scoop? Is there a way to workaround the "hold" period by cashing a check instead of depositing it?

(**A large regional bank based in my state, which pioneered the concept of "free checking" 20 years ago, announced last week that they are discontinuing free checking because of the restrictions on overdraft charges. Sucks for low-income people who can't afford the $10/month fee for a regular checking account....)

[elizabeth]

But that's just it. Banks are in business to make money. Even with regulations and restructuring, banks will still be in the business of making money. They will just be forced to find different ways to make it. Again, as I said in the strategic default thread, I think that ultimately it will be the people in the middle/working classes who will absorb the brunt of the fee shift.

The demise of free checking is just the first domino to fall, I think.

Banks are in the business of making money, but they are also in the business of wanting customers. Bank policies are not all mysterious and hidden, for the most part, they are listed on the bank websites, and the customer reps are the banks are more than happy to explain them to their customers. If they aren't, then they aren't the bank you want to bank with.

With the increasing regionalization (and nationalization) of banks, and with internet banks being readily available to anyone with computer access, there is no reason to bank with an institution that makes you unhappy or costs you money.

[mowse]

As I explained above, it has nothing to do with the Patriot Act. Another solution, Micki, is to find another bank. Yours doesn't sound like it meets your needs at all!

See, our CREDIT UNION blames everything on the patriot act :P They said they have to follow these rules.

I've found as long as I don't use the credit union service center, we generally don't have a problem. The service center is a multibranch location where people from all the local CUs can bank. Our credit union only has one location, and the service center is less than 2 miles from my house. So the only time I use the service center is when I have a payroll check.

I wish the banks would give the "rules" in plain english. Our CU has a lot of hidden fees that are antiquated but they are expanding and I hope with the expansion it will mean the whole thing is more user friendly.

FWIW: We've been talking to people who bank with other institutions and they all have problems/issues with their banks and credit unions. Not the same issues we have, tho. To me, it's a matter of the devil we know vs the one we don't.

Oh and when they caused those overdraft fees, they did refund all the monies! They screwed up our account big time right around Thanksgiving and reversed all of those fees as well. They put a hold on some money in our account for no reason and of course we couldn't tell there was a hold on the website. We called and it took them about three days to figure out that it was a computer error. They had to trace it back and make sure there wasn't a pending transaction somewhere.

[kinsey]

At other websites I read, there is frequent debate about overdraft fees. Apparently, people have the experience of depositing a check, believing the funds are available once deposited, and then having checks written against those funds bounce because their bank placed a hold on the funds for a couple of days/week.

Here's what I don't understand - and keep in mind that I can't even tell you the last time I've had to personally deal with anything related to a checking account, so I'm truly clueless about this - what would happen if a person walked into their bank with a check and instead of depositing the check, they actually cashed it? Couldn't they then turn around and deposit the cash into their checking account? Or do banks not cash checks anymore - are you only allowed to deposit them? What about that line on the deposit slip that indicates how much cash you'd like back from a deposit of checks - do they still allow that?

I have actually had this exact situation - I deposited a check (and kept out like $50 cash) and walked away w/my receipt saying "funds deposited XX/XX/XXXX $XXX.XX". So I proceeded about my weekend, using my debit card as usual. I checked my acct online the next week, and was hit w/over draft fees for each transaction that weekend. (!!) I went back in, showed the branch manager my deposit receipt, he pointed out that it said "funds deposited", not "available funds". As it turns out, those funds were not available (although my receipt did not state that). He removed all but one of the overdraft fees, but said I "should have known" the funds weren't available yet. I pointed out that I had kept out cash, so surely at least $50 of the funds were available lol.

Also, he told me eventually that had I deposited the check via ATM rather than at the counter w/a clerk, the funds would have been available that day. I guess the counter business "day" ends like an hour before the ATM? So had I put the check in the ATM, it would have gone on Friday's business and been available for the weekend charges. But since I went to the counter, where the business "day" had already ended, the check wasn't available until the next business day, Monday. ?? How was I supposed to know this??


As it turned out, I walked in with $150ish in overdraft charges, and walked out with $26 in charges. Yeah, if I'd pushed up the line a bit, maybe I could have got that $26 back as well, but i was ok with it, given my lack of time to care lol.


Lesson Learned: I always make sure to ask for my AVAILABLE balance at the counter.

[Meagan]

Wait - so it's a government policy for banks to hold checks? For security reasons?

So the government sets a regulation that banks have to follow...and the regulation (holding checks) helps spur the spike in overdrafts (and accompanying fees) over the past few years....and people rail against the banks? (Not you, Micki, but it is a HUGE sentiment that I run into a lot.) So now the government is also putting limits on overdraft fees....so banks are responding by cutting back on things like free checking accounts....and, again, people are blaming the banks.

sigh.

I've never heard of any kind of mandatory government policy for banks to hold checks. Sometimes ours does if it's out of state or over a certain amount. Sometimes they don't. It's very inconsistent and sometimes I can get the teller to waive the hold, or the bank manager will sometimes remove the hold soon after (they just have to call the other bank to verify the funds are there, IIRC). Sometimes I can't get anyone at the bank to help me out at all. Sometimes they decide a check warrants a two-day hold. Sometimes it's 5 and I've even heard of 10, which nowadays seems ridiculous.

At my bank you can only cash a check if it was drawn on that same bank.

[Meagan]

But that's just it. Banks are in business to make money. Even with regulations and restructuring, banks will still be in the business of making money. They will just be forced to find different ways to make it. Again, as I said in the strategic default thread, I think that ultimately it will be the people in the middle/working classes who will absorb the brunt of the fee shift.

The demise of free checking is just the first domino to fall, I think.

I do agree that banks are in the business of making money. And every time I've paid an overdraft fee it has been something I could have avoided if I had been more careful. I totally take responsibility for that.

BUT...

I am also a customer, and it doesn't feel good to be treated so *punitively* for making a minor mistake. Knowing how much money the banks make on fees make me angry, not because people shouldn't be responsible for their own money (of course they/we should) but because they are actively making a huge profit off their customer's (often minor) mistakes. They didn't provide a real service or DO anything for that $36...it's like they just played a "gotcha!" game, and it leaves a bad taste in my mouth.

However, you're probably right that any money they "lose" (i.e. don't get) from this change will probably be reflected somewhere else.

[kinsey]

Meant to include: When I was talking w/the manager, he told me that I could have cashed the check at the counter and then deposited it in the ATM, getting it on the same day business that way as well.

So apparently, my bank is rather willy-nilly about the holds on funds, but by the letter regarding the counter deadlines for end of business lol.


I have actually had this exact situation - I deposited a check (and kept out like $50 cash) and walked away w/my receipt saying "funds deposited XX/XX/XXXX $XXX.XX". So I proceeded about my weekend, using my debit card as usual. I checked my acct online the next week, and was hit w/over draft fees for each transaction that weekend. (!!) I went back in, showed the branch manager my deposit receipt, he pointed out that it said "funds deposited", not "available funds". As it turns out, those funds were not available (although my receipt did not state that). He removed all but one of the overdraft fees, but said I "should have known" the funds weren't available yet. I pointed out that I had kept out cash, so surely at least $50 of the funds were available lol.

Also, he told me eventually that had I deposited the check via ATM rather than at the counter w/a clerk, the funds would have been available that day. I guess the counter business "day" ends like an hour before the ATM? So had I put the check in the ATM, it would have gone on Friday's business and been available for the weekend charges. But since I went to the counter, where the business "day" had already ended, the check wasn't available until the next business day, Monday. ?? How was I supposed to know this??


As it turned out, I walked in with $150ish in overdraft charges, and walked out with $26 in charges. Yeah, if I'd pushed up the line a bit, maybe I could have got that $26 back as well, but i was ok with it, given my lack of time to care lol.


Lesson Learned: I always make sure to ask for my AVAILABLE balance at the counter.

[Jewel2]

when in reality, it is as you said Bonny. The same happened at my bank, which promotes "free checking" and has been for many years, but past a promotional period, there is only free checking if you maintain a balance beyond a certain amount (which is pretty high) or you have some other account w/ the bank -- brokerage account or CD. Low income people didn't get free checking before, but I'm sure my bank will try to blame it on something new.

This is typical of businesses who don't want additional regulation (sorry I'm cynical) and will only get worse w/ the Supreme Court's (absolutely horrifying) recent corporate speech case. Financial institutions have a great deal of power in this coutry and they will have more -- I for one do not believe this idea that all regulation will do will hurt the little people, but banks are paying a lot of advertising agenices and lobbyists to make people believe that is true.


I use that bank. There hasn't been much free about their "free checking" for the last several years, really, other than the name. (And, fwiw, at that partiacular institution, I believe there are holds on even payroll checks, too). So to put a cap on their almost $40 overdraft charge, what are they changing about their "free checking?"

[Loopy]

At other websites I read, there is frequent debate about overdraft fees. Apparently, people have the experience of depositing a check, believing the funds are available once deposited, and then having checks written against those funds bounce because their bank placed a hold on the funds for a couple of days/week.

Here's what I don't understand - and keep in mind that I can't even tell you the last time I've had to personally deal with anything related to a checking account, so I'm truly clueless about this - what would happen if a person walked into their bank with a check and instead of depositing the check, they actually cashed it? Couldn't they then turn around and deposit the cash into their checking account? Or do banks not cash checks anymore - are you only allowed to deposit them? What about that line on the deposit slip that indicates how much cash you'd like back from a deposit of checks - do they still allow that?

On the one hand, I think it sucks that somebody who writes checks in good faith against money they deposited in their account could inadvertently accrue several overdraft charges. OTOH, the upcoming legislative changes that will limit the amount that banks can charge in overdraft fees is already having anti-consumer effects.**

So, what's the scoop? Is there a way to workaround the "hold" period by cashing a check instead of depositing it?

(**A large regional bank based in my state, which pioneered the concept of "free checking" 20 years ago, announced last week that they are discontinuing free checking because of the restrictions on overdraft charges. Sucks for low-income people who can't afford the $10/month fee for a regular checking account....)

I haven't read the other replies so I could be saying the same thing but I can tell you how my banks have always handled that. On regular paychecks (they know those checks come in once a week and have for 15 yrs, never bounced) they post them available the same day. On anything else, they either hold it if it's over $200 or they won't cash it unless we have enough in the account to cover it - and they put a hold on that amount. When we sold the boat last year I had a baaaad feeling about the people so even though I deposited the check I didn't write checks with that amount at the time. Sure enough, the following week my bank's accounting dept called and the check had been returned. :( Had I written any checks, we would have had od charges.

[ecilA]

Our bank will place a hold on a check from a "new" source but if we have an established relationship they will allow us access to the funds, that is, at least in terms of my business. What I don't get is that the holds are probably not necessary in this electronic age, it's a holdover that benefits the bank as they can use that money until the hold is released. If I go to the store and write a check it is treated as a debit and removed from my account immediately but if I deposit a check from a private source it is held a week, seems kind of wrong to me.

Anyway, I wanted post my musings over the holds on the level covered but also had a tale that was kind of interesting about bank holds.

About 15 years ago I had a job that gave me a free checking account as a perk of the job. The account was with their bank. Imagine my surprise when they placed a two week hold on my pay when the company I worked for banked with them and checking availability and delay of processing should not have been an issue. They told me that this was policy-period. Now this two week hold was lifted after a certain period of time, kind of like the established relationship thing that I have with my bank now. Oh, the other part of this was that they tried to put a hold on my child support checks as well which were government issue (because by state law child support was mandated to go through the division of child support enforcement) and I had to convince them not to hold these funds and was successful. I don't know when the legislation discussed above was enacted but our situation with the account was an example of why it had to be enacted. These bank policies made it impossible to pay rent, eat and pay for the child care, it was a really bad spot to be in.

eta: in that situation I actually could choose to cash the checks and deposit cash because I was already at the bank the paycheck was written from. This is really what made it so ludicrous and as I recall, until the hold period passed, this is exactly what I did, cashed and deposited rather than wait for the hold to pass, I just had to learn the hard way with my first deposits.

[Vicky]

What I don't get is that the holds are probably not necessary in this electronic age, it's a holdover that benefits the bank as they can use that money until the hold is released. If I go to the store and write a check it is treated as a debit and removed from my account immediately but if I deposit a check from a private source it is held a week, seems kind of wrong to me.

It takes a day or two to show up in my account. The only transactions that do show up right away are debit transactions with PIN.

It is a common misconception that banks receive funds from other banks immediately, as it is just not true. No bank is that speedy in letting go of money! LOL! It can take up to three weeks if the account is out of state. Local banks usually are quicker, but it is NOT immediate. Banks very often release funds to customers well before they have actually been paid by the other financial institution.



About 15 years ago I had a job that gave me a free checking account as a perk of the job. The account was with their bank. Imagine my surprise when they placed a two week hold on my pay when the company I worked for banked with them and checking availability and delay of processing should not have been an issue. They told me that this was policy-period. Now this two week hold was lifted after a certain period of time, kind of like the established relationship thing that I have with my bank now. Oh, the other part of this was that they tried to put a hold on my child support checks as well which were government issue (because by state law child support was mandated to go through the division of child support enforcement) and I had to convince them not to hold these funds and was successful. I don't know when the legislation discussed above was enacted but our situation with the account was an example of why it had to be enacted. These bank policies made it impossible to pay rent, eat and pay for the child care, it was a really bad spot to be in.

eta: in that situation I actually could choose to cash the checks and deposit cash because I was already at the bank the paycheck was written from. This is really what made it so ludicrous and as I recall, until the hold period passed, this is exactly what I did, cashed and deposited rather than wait for the hold to pass, I just had to learn the hard way with my first deposits.

Reg CC went into effect in 1988. The situation you describe is just ridiculous. If the check was drawn on the same bank, and you could cash it, why on earth could they not give you immediate availability on your deposit? Why would they place a hold on a check from their own institution?

[ecilA]

It takes a day or two to show up in my account. The only transactions that do show up right away are debit transactions with PIN.

It is a common misconception that banks receive funds from other banks immediately, as it is just not true. No bank is that speedy in letting go of money! LOL! It can take up to three weeks if the account is out of state. Local banks usually are quicker, but it is NOT immediate. Banks very often release funds to customers well before they have actually been paid by the other financial institution.?

What was the name of that new banking thing, we discussed it here when it went into effect, check 21 or something? When that happened, some stores began using paper checks as debits and they hand back the check at the register, in this instance the debit is immediate, we will see it on our bank records by the time we get home. That's what I'm thinking of and I wonder why they don't use these same electronic transfer means with deposits, that's really at the root of my question about the continuing delays.




Reg CC went into effect in 1988. The situation you describe is just ridiculous. If the check was drawn on the same bank, and you could cash it, why on earth could they not give you immediate availability on your deposit? Why would they place a hold on a check from their own institution?

It was a rediculous situation, it made absolutely no sense. The only thing I can figure is that since it was policy to place these holds the bank didn't want to make exception for checks drawn from their own bank, perhaps it added a step to pay attention to the bank of origin in that way? It seemed silly to be able to cash and deposit but I have to tell you, it was a really good thing that I was able to do it as we were not in a position to wait two extra weeks for a paycheck that was already on a pay delay.

[Vicky]

Yes, check 21. When I pay by check electronically, though, it does not come out immediately at all. The check is just processed as an electronic image instead of a paper item. Maybe the store banks at the same bank as yours? I don't know.

[Tangwystl]

But that's just it. Banks are in business to make money. Even with regulations and restructuring, banks will still be in the business of making money. They will just be forced to find different ways to make it. Again, as I said in the strategic default thread, I think that ultimately it will be the people in the middle/working classes who will absorb the brunt of the fee shift.

The demise of free checking is just the first domino to fall, I think.

Yes but most business are in the *buisiness of making money*. Most buisnesses try to make it more appealing to do business with them. They try to do things to enhance transactions for their customers. If any other business had so many extra fees for "services" they wouldn't stay in business very long. Everyone needs a bank and I think they take advantage of that to the extreme.

[Mary]

Just saw this one. I will echo what Vicky said and add that in many cases, it really is for the protection of the consumer. The bank does not get funds from and outside check immediately and there are many banks who will no longer verify funds. Not to mention, if they do verify funds, they can only verify that funds are available AT THAT MOMENT. Say, for instance, you sell your car and get a personal check from a different bank as payment. Your bank verifies the funds are good. You deposit or cash the check and go about your merry way, spending the money as a down payment for a new car. Three days later, you get a call from the bank telling you that you now owe that amount but you no longer have the money available, having put it down on your new car. How could the check bounce? Easy - pending withdrawls, debits or inclearing checks that went through before the check you deposited was processed. Had there been a hold, the check would have been returned before you unwittingly spent the funds.

At the credit union branch where I work, we don't do a lot of holds because we know our members and it's a small town, so we usually know where the check is coming from. But if there is a question of validity (MoneyGrams and Money Orders from strange places are the DEVIL and often fraudelent - hate them), we do put a hold. If it's a large amount or unusual circumstances, we will put a hold. It's not so we can use your money, that isn't even on my radar...it's so we don't have to track people down and give them the bad news that they owe money they may well have already spent. It's to prevent losses, it's damage control.

We have a strict check policy where I work, but the golden rule is "know your member" because we aren't going to uneccessarily inconvenience anyone. But keep in mind, we are not for profit and much more service oriented than any of the banks I know.

I have seen an increasing number of scam checks this year and we have to be vigilent about that. Luckily, most of the people who bring them in realize it's probably too good to be true. But if nobody catches it and it goes into your account or you cash it, YOU will be the responsible person for paying it back.