When you send or receive mony electronically, the money is in limbo for a period of time. The money leaves the payer’s account and sits in the bank’s own account where the bank earns interest. After some time, the money eventually finally moves into the recipient’s account. That limbo time is quite profitable for the bank. Banks maximise that limbo time to the full legal extent.
So when you send or receive money electronically, you show your love for the bank and the bank loves your patronage. Don’t like banks? Stop being lazy and go back to paper cheques. And of course it’s better to cash them rather than deposit them.
Paper cheques keep the money in the posession of the payer up until the cheque is presented. At that moment, cash is paid to the recipient. There is no profitable limbo time in this case.
This came up in this comment but thought it should have a separate thread. We are losing our right to autonomy (paper cheques) because addiction to every slight bit of convenience is taking a toll.
My experience is the opposite in the US.
When I receive money via Zelle, it shows up within seconds.
When I deposit a check, the bank places a hold for days to ensure the funds actually exist.
When I deposit a check, the bank places a hold for days to ensure the funds actually exist.
Indeed checks should be cashed. When a check is cashed, the institution that supplied the cash is actually at a loss because the cash is given as an advance until the check clears.
(edit) Is Zelle how you receive paychecks?
That’s why banks will only cash a cheque if you have money to cover it in your account. If you’re broke they’ll hold the cheque until they get paid from the other bank. I’ve never had an etransfer take longer than 5 minutes to complete.
You can go to the issuing bank and cash a check without a dime to your name and no account whatsoever. If you go to another bank, a check cashing business, or even a casino¹, the equation changes. Different regions are different. In Belgium, you can cash a cheque at the post office banque without having an account or a dime to your name, and also pay nothing² for the service.
¹ Some casinos will not only cash your check for free but also give you rewards for cashing a check in their casino, knowing that you will most likely give them some gambling action.
² The fee in Belgium used to be €4 but that was recently eliminated.
(edit)
I’ve never had an etransfer take longer than 5 minutes to complete.
You’ve never done an ACH wire transfer? Those can take 3 days, and this his how most electronic paychecks are paid in the US – or so I thought. Has that changed? Are people using Zelle for paychecks now?
That’s why banks will only cash a cheque if you have money to cover it in your account.
That sounds more like a security mechanism. How does that compensate the interest deficeit during the uncleared time? If you have money in your account, the bank is already getting interest on that to some extent. I don’t see how cashing a check could increase that.
In Canada banks let you transfer money through email. It’s very convenient and it’s become very popular. Many employees get paid that way instead of cheques now.
I have the funds. However my bank will only clear $200 the following business day and the balance the business day after.
No, I am not paid via Zelle.
I haven’t seen a cheque in 15 years
Banks can expect around 4% yearly return on investment. A bank transfer holds the money for two days. So even in the naive view that you’re taking this money from the bank, you’re getting 0.02% of the transaction value. We’re talking dollars per year. If that’s the best use of your time, what are you doing with your life?
And that’s without going into the fact that if banks’ profits are hurt they’ll just raise fees or adjust interest rates, and if banks are hurt they’ll get subsidies or bailouts.
Woah, good digs! You should be a comedian when you grow up. But please, don’t try to become a math or economics teacher; that’s not your thing.
Why are we supposed to help banks profit? They aren’t exactly skint. https://www.statista.com/statistics/386965/uk-banks-net-income-ranking/
If they want to save money they could move out of Canary Wharf to somewhere a bit cheaper…
Banks have resisted immediate electronic transfers for years until recently when they relented due to pressure (or maybe regulations?).
