Why do I have to keep checking my checks?
TESS VIGELAND: Lisa just told us how banks compete to get hold of your cash. But once they get it, you might notice something. Say you pay a bill. Most times, the money is out in minutes. But when you put something in your account, it can take days to credit. Blame it on the Check 21 law. The Congress passed it a while ago to help banks quickly process checks and payments. But it does absolutely nothing to speed up deposits.
Jean Ann Fox is with the Consumer Federation of America. Jean Ann, why does our money amble in and then just run out?
JEAN ANN FOX:
The Congress passed Check 21 to speed up check processing. They failed to speed up access to deposits for consumers. And the Federal Reserve has not changed the check hold period for 16 years.
VIGELAND:
Why is that? What’s the benefit of this to banks?
FOX:
Banks can make money on the funds that they have available between the time that your deposit clears, and before they have to make it available to you. It also gives the banks more time to be sure that no deposited check is fraudulent or – isn’t going to be covered. But the deposit hold rules even apply to cash. So if you walk into a bank today, and deposit cash over the counter with a teller, the bank doesn’t have to make that available to you to spend for 24 hours.
VIGELAND:
What about electronic transactions? Is it any different if you’re banking, say, online, and you pay your bills that way? Is there any difference whether it comes out faster or slower that way?
FOX:
Well, you should assume that anytime you hand over your debit card, or you direct your bank account to pay a bill electronically, or you write a check, that you have to have money in the account. You can’t assume that there’s going to be any time delay. Although, when you do pay bills electronically, if the merchant or the landlord can’t receive electronic funds transfer, there may be as paper check generated and put in the mail to that person, but you may not know that.
VIGELAND:
So even though you’re doing things electronically, the bank is actually cutting checks?
FOX:
It depends on whether the person being paid can receive an electronic funds transfer.
VIGELAND:
So the banks are making money then, as well, because people, perhaps, don’t understand the system. And they’re bouncing checks. And then, of course, they get hit with extraordinary fees.
FOX:
The biggest estimate I have seen is a couple of years ago from a bank consultant. He said that banks and credit unions take in over $30 billion, with a fee, in bounced check and overdraft fees from consumers who don’t have enough money in the bank when the transaction hits and has to be paid.
VIGELAND:
So, really, there’s nothing that consumers can do about this notion that there’s no float for them, but yet the banks take advantage of a float for themselves when there’s a deposit.
FOX:
Well, there is always something you can do. You – need to, you need to ask your bank if they will make your deposit available to you as soon as it clears. You can also speak to your member of Congress about changing the check hold period to reflect the modern era of electronic funds transfer. I mean, the rules we have today were set in 1990. And money moves at the speed of light now. It’s just consumers are not benefiting from that.
VIGELAND:
All right. Jean Ann Fox, thank you so much for coming in and for the great advice.
FOX:
You’re welcome.
VIGELAND:
This is Marketplace Money from American Public Media.
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