Why do cheques take 5 days to clear?

namloc1980

fritzelly wrote: »

Pass card, did I just venture on to a thread from the 90's?

Why anyone would want to still trade in cheques is beyond me bar delaying payment to the payee
Instant electronic transfers are on the way by law - no excuse for banks saying it takes 3 days for an intra-EU money transfer. Probably take less time for your boss to transfer the money electronically than writing cheque signing it/waiting for it print out.

Throw in the 50c stamp duty per cheque and they make even less sense to use. Some businesses do use them to buy an extra few days in terms of cashflow but really they are a relic best consigned to the past.

jester77

jester77 wrote: »

People still use cheques

I'm over 40 and have never seen or gotten one, I remember my dad having to deal with them in my younger days.

Cheques are the only thing that make sense in many situations. For example in farming everything is still cheques from paying contractors or the vet to getting paid for selling stock at the mart or factory.

I’d never use a cheque personally but on the farm almost every transaction in or out is by cheque.

jester77

Harry Tight Technician wrote: »

Cheques are the only thing that make sense I’m in many situations. For example in farming everything is still cheques from paying contractors or the vet to getting paid for selling stock at the mart or factory.

I’d never use a cheque personally but on the farm almost every transaction in or out is by cheque.

That's mad. So sending out an invoice and doing a bank transfer is not done at all?

jester77

jester77 wrote: »

That's mad. So sending out an invoice and doing a bank transfer is not done at all?

Completely unheard of from my experience. You might use the farm account debit card in the hardware store but to be honest that’s even rare the cheque book is normally used even in shops when it’s related to the farm. As a person who is very experienced with online banking etc I would still think the cheque book is the handiest and most straight forward way to make many day to day payments and the same for receiving when it’s farm business related. A lot of people you would be detailing with too would hardly know how to use an atm never mind online banking.

The one major farm related payment that is done by bank transfer is the basic farm payment and other subsidy payments but that’s different as it’s coming from the gov/eu rather than being part of the day to day transactions of a farm.

EdgeCase

I still see them used for dividends and refunds and small payments where they're basically printed as part of the statement and torn off.

SEPA should be able to have an inward payment address rather than having to hand out your bank account number to strangers.

I can't see why you couldn't just send it to username@IEAIB2K or something like that. Something that could only be used to receive payments and was separate from your full account details.

Obvious Desperate Breakfasts

jester77 wrote: »

People still use cheques

I'm over 40 and have never seen or gotten one, I remember my dad having to deal with them in my younger days.

I find that really hard to believe. I’m 34 and haven’t got one in a while but have received plenty of cheques in my life. You’ve seriously never seen a cheque despite being born in the ‘70s?

meeeeh

Harry Tight Technician wrote: »

Completely unheard of from my experience. You might use the farm account debit card in the hardware store but to be honest that’s even rare the cheque book is normally used even in shops when it’s related to the farm. As a person who is very experienced with online banking etc I would still think the cheque book is the handiest and most straight forward way to make many day to day payments and the same for receiving when it’s farm business related. A lot of people you would be detailing with too would hardly know how to use an atm never mind online banking.

The one major farm related payment that is done by bank transfer is the basic farm payment and other subsidy payments but that’s different as it’s coming from the gov/eu rather than being part of the day to day transactions of a farm.

Farmers do use cheques more than others and it's a headache. Sometimes they bounce (we know the customers so we do get the money eventually), they can be cancelled and so on. They are the most unreliable and annoying form of payment.

murpho999

Harry Tight Technician wrote: »

Completely unheard of from my experience. You might use the farm account debit card in the hardware store but to be honest that’s even rare the cheque book is normally used even in shops when it’s related to the farm. As a person who is very experienced with online banking etc I would still think the cheque book is the handiest and most straight forward way to make many day to day payments and the same for receiving when it’s farm business related. A lot of people you would be detailing with too would hardly know how to use an atm never mind online banking.

The one major farm related payment that is done by bank transfer is the basic farm payment and other subsidy payments but that’s different as it’s coming from the gov/eu rather than being part of the day to day transactions of a farm.

How is it the handiest?
You have to store a chequebook, then get it, write out by hand and sign it and then get it to the person or company you wish to pay.

This is costing you ridiculous bank charges, stamp duty, postage and envelopes.

Alternatively, at a very basic level get bank details, set up payee on bank system and then you just have to enter an amount each time you want to pay them.

At a higher level for business AP systems can send payment once bank details are set up , email remittance advices are sent as well.

This a huge efficiency increase, is safer, less open to fraud, and hugely cheaper for all parties.

Also, makes bank reconciliations for businesses much easier as there are no pending cheques to worry about.

It’s all connected with the age of the people running the businesses and their mindset and refusal to adapt.

There is absolutely nothing handier about cheques.

igCorcaigh

I guess one advantage is that you only need to know the recipient's name and address rather than their bank details.

P. S.: Bank transfer finally hit my revolut after 48 hours. I hate banks.

Mortelaro

meeeeh wrote: »

I get the process and why it takes longer than electronic transfers but I don't buy the whole 5 day process or two days for the electronic transfer from one bank to another. If payments through Europe can be processed in one day so can payments between two banks in the same country.

Sepa transfers if done before the daily cut off time go in overnight
Electronic transfers bank of Ireland to bank of Ireland,different customers and different branches are same day or instant

Cheques are 5 days because the person writing them has the right to stop them which is still a manual paperwork process meaning,4 days later,the receiving bank might not be paid
Cheques won't be around much longer so that system isn't being changed

Graniteville

namloc1980 wrote: »

Day 1 you lodge it.
Day 2 your bank processes the cheque and sends it to the other bank.
Day 3 the other bank gets the cheque and processes it and posts it to the drawers account.
Day 4 the money is released from the drawers account.
Day 5 it arrives in your account. This may happen day 4.

That's the old way.

It now goes to a central processing unit who forward image of the cheque to the bank it is drawn on, but still has to await confirmation from the bank that the signature is good and that the cheque is valid.

It still takes five days for the funds to be fully cleared as the person who wrote the cheque has the opportunity to cancel it up to then.

After 5 days the funds are cleared and cannot be recalled.

A bank at its discretion can allow you draw funds on a cheque immediately. Just ask them to permit this especially if you still get cheques regularly

meeeeh

I don't like cheques but I can see how they are handy for farmers. If you have nobody in the office and have to pay larger amounts cheque is handy. I don't use cheques except for charity donations and to get rid an odd sales rep from the office.

igCorcaigh

Graniteville wrote: »

It still takes five days for the funds to be fully cleared as the person who wrote the cheque has the opportunity to cancel it up to then.

After 5 days the funds are cleared and cannot be recalled.

Now that makes sense.

meeeeh

Mortelaro wrote: »

Sepa transfers if done before the daily cut off time go in overnight
Electronic transfers bank of Ireland to bank of Ireland,different customers and different branches are same day or instant

Bank of Ireland to another bank usually takes a day. I was processing wages 15 years ago in another country. The transfers between banks took half an hour max then without extra charges for urgent transfers. I don't believe it has to take a day in Ireland unless it suits banks for whatever reason.

topper75

Is it something to do with banks managing liquidity ratios ie making sure that big jolts can be covered on the interbank market?

e.g. if PTSB customers happened to write out a greater than usual amount of cheques for large values against AIB, the liquidity ratios of both banks would take a shock that would have to be adjusted. One would have to hold back and one would be able to increase their lending.

jester77

Obvious Desperate Breakfasts wrote: »

I find that really hard to believe. I’m 34 and haven’t got one in a while but have received plenty of cheques in my life. You’ve seriously never seen a cheque despite being born in the ‘70s?

I've seen my father using cheques when I was younger, but I haven't seen one since at least my teens. I wouldn't even know what to do with a cheque if I ever got one. Not sure if the banks here in Germany would even accept a cheque.

meeeeh

jester77 wrote: »

I've seen my father using cheques when I was younger, but I haven't seen one since at least my teens. I wouldn't even know what to do with a cheque if I ever got one. Not sure if the banks here in Germany would even accept a cheque.

I know that they accept Irish cheques but they take very long to clear, I don't think German banks offer cheques. But yeah where I come from cheques are not in use for about 30 years.

2smiggy

I would invoice large sums of money, much to farmers. They like to call to the office and pay by cheque in general as they try get a few more euros off the bill. They can't really argue the bill over email and bank transfer !!

Obvious Desperate Breakfasts

jester77 wrote: »

I've seen my father using cheques when I was younger, but I haven't seen one since at least my teens. I wouldn't even know what to do with a cheque if I ever got one. Not sure if the banks here in Germany would even accept a cheque.

Oh, you said you’d never seen one.

At 34, I’ve had two jobs that paid by cheque (late ‘90s, early ‘00s, one of them was a big corporation), I received wedding presents in cheque form, my grant payments in college were cheques and I’ve received them for all kinds of miscellaneous reasons throughout my life too. If you spent any of your life in Ireland, I’d say you are an outlier in your age group in never personally receiving a cheque ever. They are rare nowadays but even only fifteen years ago they were commonplace in Ireland.

ohnonotgmail

Obvious Desperate Breakfasts wrote: »

Oh, you said you’d never seen one.

At 34, I’ve had two jobs that paid by cheque (late ‘90s, early ‘00s, one of them was a big corporation), I received wedding presents in cheque form, my grant payments in college were cheques and I’ve received them for all kinds of miscellaneous reasons throughout my life too. If you spent any of your life in Ireland, I’d say you are an outlier in your age group in never personally receiving a cheque ever. They are rare nowadays but even only fifteen years ago they were commonplace in Ireland.

I'm in the same age group as jester77 and the last and only time i was paid by cheque was the early to mid 90's. the only reason that company paid by cheque is because they were always struggling to have enough money to pay payroll and paying by cheque gave them a little extra time. The only other cheques i have received are from the government. i got an ATM card with my first bank account in college and i've never had a personal chequebook. I did have a business chequebook when i was working as a contractor but i dont think i ever actually wrote a cheque from that account. I associate cheques with my fathers generation.

Logo

I remember my dad telling me to cross cheques and make them out to payee account only. Then I'd head for the spaceship for liftoff home.

meeeeh

ohnonotgmail wrote: »

I'm in the same age group as jester77 and the last and only time i was paid by cheque was the early to mid 90's. the only reason that company paid by cheque is because they were always struggling to have enough money to pay payroll and paying by cheque gave them a little extra time. The only other cheques i have received are from the government. i got an ATM card with my first bank account in college and i've never had a personal chequebook. I did have a business chequebook when i was working as a contractor but i dont think i ever actually wrote a cheque from that account. I associate cheques with my fathers generation.

We are in industry that is not very high tech and there are a lot of 'interesting' operators. We get a lot less cheques nowdays but because our invoices are often for fairly high amounts cheques would still be more common than card payments. Electronic transfer are most common. By far the least used is cash, I might get one or two people paying with cash per year.

Obvious Desperate Breakfasts

ohnonotgmail wrote: »

I'm in the same age group as jester77 and the last and only time i was paid by cheque was the early to mid 90's. the only reason that company paid by cheque is because they were always struggling to have enough money to pay payroll and paying by cheque gave them a little extra time. The only other cheques i have received are from the government. i got an ATM card with my first bank account in college and i've never had a personal chequebook. I did have a business chequebook when i was working as a contractor but i dont think i ever actually wrote a cheque from that account. I associate cheques with my fathers generation.

I’ve never had a chequebook myself but have received many in my lifetime.

The corporation that paid us by cheque most certainly had no money issues!

Feisar

jester77 wrote: »

People still use cheques

I'm over 40 and have never seen or gotten one, I remember my dad having to deal with them in my younger days.

For my 21st we had a party in the house Dad and I went into town to get a load of booze. Can't remember if it was three or four hundreds worth. Dad busts out the cheque book. I'm like mmm don't think so Dad! He couldn't understand why not. This ain't yer local builders providers with Johnny you know for years behind the counter.
He doesn't have a bank card, to this day he goes into the bank to get money.

From one school. Old school.

murpho999

murpho999 wrote: »

How is it the handiest?
You have to store a chequebook, then get it, write out by hand and sign it and then get it to the person or company you wish to pay.

This is costing you ridiculous bank charges, stamp duty, postage and envelopes.

Alternatively, at a very basic level get bank details, set up payee on bank system and then you just have to enter an amount each time you want to pay them.

At a higher level for business AP systems can send payment once bank details are set up , email remittance advices are sent as well.

This a huge efficiency increase, is safer, less open to fraud, and hugely cheaper for all parties.

Also, makes bank reconciliations for businesses much easier as there are no pending cheques to worry about.

It’s all connected with the age of the people running the businesses and their mindset and refusal to adapt.

There is absolutely nothing handier about cheques.

Most cheques are handed over in person so you aren't posting stuff and these transactions are often done standing in a yard or calling over to the house of the person you are paying (only finding out when you get there what the bill is). Some of the people you would only be paying as a once off and many would not accept a bank transfer as they wouldn't understand it.

I don't see how writing you name and the amount on a cheque and handing it to someone is less handy than having to get their details, log on to the online banking, get them set up and verified and then transfer the money and thats if they accept it.

On the receiving side most people, even other business only pay by cheque thats how they do it.

jester77 wrote: »

I've seen my father using cheques when I was younger, but I haven't seen one since at least my teens. I wouldn't even know what to do with a cheque if I ever got one. Not sure if the banks here in Germany would even accept a cheque.

Did you not get cheques when you got married (if you are married). About 20 guests gave us a cheque rather than cash. Even aside from the farming I mentioned cheques are still very popular with my parents generation and they use them all the time for things.

I’m 33 and have regularly received personal cheques troughout my life for various different reasons (totally aside from farm business cheques). Last one I got was last week for example.

I really do think they still have their place and are handy for paying larger amounts of money on the spot than the other options and while I’ve not got a personal cheque book I keep considering getting one as every now and then I really feel it would be useful.

the_pen_turner

at least 75% of my invoices are paid by cheque . the rest cash. bank transfers are so rare that i doubt it would even hit 1%

cheques are a pain in lots of ways but are handy for the customer. especially older people and farmers.

jester77

Harry Tight Technician wrote: »

Did you not get cheques when you got married (if you are married). About 20 guests gave us a cheque rather than cash. Even aside from the farming I mentioned cheques are still very popular with my parents generation and they use them all the time for things.

I’m 33 and have regularly received personal cheques troughout my life for various different reasons (totally aside from farm business cheques). Last one I got was last week for example.

I really do think they still have their place and are handy for paying larger amounts of money on the spot than the other options and while I’ve not got a personal cheque book I keep considering getting one as every now and then I really feel it would be useful.

Not married, but I left Ireland around 17 years ago, but even before that I never got a cheque. I'm probably not the typical finance person. The last time I was even in a bank was late 90's or early 00's when I had to go with some ID so that they could enable online banking for me. I didn't even have to go to a bank when I got my mortgage.

I do everything online, invoices come in the post, do a quick transfer. Do most of my shopping using payment through my phone. My current bank doesn't even have branches.

murpho999

Harry Tight Technician wrote: »

Most cheques are handed over in person so you aren't posting stuff and these transactions are often done standing in a yard or calling over to the house of the person you are paying (only finding out when you get there what the bill is). Some of the people you would only be paying as a once off and many would not accept a bank transfer as they wouldn't understand it.

I don't see how writing you name and the amount on a cheque and handing it to someone is less handy than having to get their details, log on to the online banking, get them set up and verified and then transfer the money and thats if they accept it.

On the receiving side most people, even other business only pay by cheque thats how they do it.

How would somebody not understand a bank transfer?

If they have a business then they have a bank. Vast majority of businesses, small or large, nowadays put their bank transfer on their invoices.

If you have a business you won’t pay any bill without an invoice.

A one-time set up for bank transfer which is not as complicated as you make out is all that is required. Their bank will accept it. No need for verification.

Then,when you login to the bank account you can pay multiple invoices at once. It really is very easy, quicker, cheaper and safer. Cheques can get lost, frauded etc.

I’d say banks will stop processing cheques in the next few years so the problem will disappear. Payment will be done by phones which will be instant and quicker than any bank transfer.

Old age and death will look after those that do not want to change.

meeeeh

murpho999 wrote: »

How would somebody not understand a bank transfer?

If they have a business then they have a bank. Vast majority of businesses, small or large, nowadays put their bank transfer on their invoices.

If you have a business you won’t pay any bill without an invoice.

A one-time set up for bank transfer which is not as complicated as you make out is all that is required. Their bank will accept it. No need for verification.

Then,when you login to the bank account you can pay multiple invoices at once. It really is very easy, quicker, cheaper and safer. Cheques can get lost, frauded etc.

I’d say banks will stop processing cheques in the next few years so the problem will disappear. Payment will be done by phones which will be instant and quicker than any bank transfer.

Old age and death will look after those that do not want to change.

Yes but before the internet will have to be better. If you expect people in the middle of nowhere do transfers for large amounts then you should better supply decent internet. It's not like all people who use cheques don't want to change but if it takes half an hour to log into online banking or when the connection breaks three times while you are processing payments then people will use cheques. This kind of stuff especially affects farmers or business that need to be outside towns and cities.

murpho999

murpho999 wrote: »

How would somebody not understand a bank transfer?

If they have a business then they have a bank. Vast majority of businesses, small or large, nowadays put their bank transfer on their invoices.

If you have a business you won’t pay any bill without an invoice.

In farming you are dealing with a lot of older people or people who are not computer savvy. The only way they could check they were paid is by going into a bank (many of which no longer have someone behind a counter) and check their balance thus allowing the person leave with what they have bought the person has no idea if they have been paid. Where as a cheque can be handed to them for the amount agreed on the spot. Also even for the person paying, you may have poor reception etc and if you want to pay the person on the spot so you cant even do a transfer if they are set up so a cheque just makes sense.

I just don't think you understand how things work in farming and thats why you are finding it difficult to understand. The fact you said "no business would pay without an invoice shows that". You will pay many bills and receive money without any invoice in farming. Amounts are often just word of mouth on the spot amounts that you write a cheque for.

If you sell at the mart you are paid by the mart sending you a cheque, thats the only way you can get paid by many marts and its certainly the case with my local mart. If you wont accept a cheque you can't get paid

As an example when we pay our silage contractor we call to the house to find out how much we owe which we are told by word of mouth and we write a cheque on the spot for the amount hand it over, job done.

murpho999 wrote: »

A one-time set up for bank transfer which is not as complicated as you make out is all that is required. Their bank will accept it. No need for verification.

Then,when you login to the bank account you can pay multiple invoices at once. It really is very easy, quicker, cheaper and safer. Cheques can get lost, frauded etc.

I know its not complicated, I use online banking everyday but I can tell you for a fact that its not suitable yet anyway for many day to day on the spot farm business transactions.

As for multiple invoices as above, farming tends to paying paying here and there its rarely you even have an invoice never mind multiple to pay at one time. A large percentage of payments are on the spot in person payments. There are of course some areas where you are invoiced and if you wished could use bank transfer (if they accept it) or call in and pay by debit card but it would be less than 20% of transactions and its often as handy to just write a cheque.

murpho999 wrote: »

I’d say banks will stop processing cheques in the next few years so the problem will disappear. Payment will be done by phones which will be instant and quicker than any bank transfer.

Old age and death will look after those that do not want to change.

Not a chance will they stop processing cheques anytime soon, they are far far more used than many realise (such as yourself) so no longer accepting them is not going to happen for a long long time.