How Long Before My Cheque Clears?

By: Chris Haycock | Posted on: 25 June 2015

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Picture this... you've been given a cheque for five hundred pounds and you've just popped along to your local bank branch to deposit it, only to be told it'll take up to five working days to clear. It's frustrating, and raises questions as to why it takes so long for a cheque to be cleared into your bank account. We investigate why.

Although they are being used less as a way of passing money from one account to another, cheques are still a vital way to pay someone.

They've been around for decades, but little is known how cheques pass through the banking system, and why it can take so long for it to clear at its destination account. Let's have a look.

Day One

You've just given your cheque to the friendly cashier at your local branch, who has scanned it and registered it on their systems (this also happens if you use an electronic paying-in machine).

Once the bank has registered it on their system you'll be able to see it on your account as a cheque received, although you won't yet be able to get hold of the cash just yet.

At the end of each banking day (Monday - Friday) all the cheques received into their systems are sent to a cheque clearing centre to be sorted and processed so that they are ready to be exchanged with other banks.

Day Two

Your cheque is scanned through special machines (reader/sorter) that automatically reads the details on each cheque, including the cheque number, sort code, account number, date etc.

They are then sorted by a six-digit number (branch sort code) that determines which bank or building society it refers to.

Once they have been sorted they are sent for processing (again) at an exchange centre, of which there are two - one based in England and the other in Scotland. This all happens before 11am.

The cheques then go through an in-clearing process which enables them to be checked against suspicious activity such as tampering, fake signatures and other fraudulent checks.

Day Three

Today your bank is able to begin paying interest on your cheque, with a few exceptions who quite nicely take the risk and start paying interest on the day that you deposit your cheque.

The settlement process finally begins, and the two banks settle the value of the cheque that has been exchanged between them. The originating bank will make cheques to ensure that there are enough funds in the account to pay the sum owed, as well as ensuring that the cheque is geniune and matches the signature.

The originating bank then decides whether that cheque is to be paid or returned unpaid. As a matter of interest, as many as 99.5% of all cheques are paid.

Day Four

Hurrah. You can now finally withdraw your money. Today is the day that the money appears on your account as being able to be withdrawn.

However, if the cheque is being paid into a savings account it'll be another two days until you're able to get hold of that cash.

Who clears the cheques?

The company who clears all cheques are the Cheque and Credit Clearing Company, a non-profit organisation that processess cheques, bankers' drafts, postal orders, warrants, government payable orders and travellers cheques.

They exist to provide the public, companies, organisations and the government with a central payment system to exchange and settle cheques and credits.

Do banks earn interest from uncleared cheques?

A system is in place called the 2-4-6 method, created by the Cheque and Credit Clearing Company, that states that there needs to be two days until the cheque is earning interest, 4 until it can be withdrawn, and 6 until the guarantee that the cheque has cleared.

This system ensures that banks are not able to generate revenue from interest, as it guarantees that it will be YOU that will earn any interest due on the money, rather than the bank.


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