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In Reply to: RE: AA classified response posted by Bigromano on July 26, 2009 at 16:56:56
It's the same in Canada as well. Every country, every bank.
The hold your bank places on checks (or "cheques" in Canada) has nothing to do with clearing the check. It's mostly because they can get away with it, because customers see it as a reasonable way for the bank to protect itself. All the bank is doing is using your money for free after the check clears but before it's credited to your account.
In Canada, all checks clear in less than 24 hours if drawn on a Canadian Bank.
In the US, all checks from Canadian Banks clear in 24 hours, because all Canadian Banks have Federal Reserve accounts and are the same as a US bank when it comes to check clearing. In Banker's lingo, a US Banker would say "Canadian checks clear directly".
There is more money moving from Canada to the US and from the US to Canada every single day than between any two other countries on Earth.
Because there are a huge number of US banks, all of which can differ in the systems they subscribe to, it's not always possible to clear a US check in 24 hours, even to another US bank. However, with the larger US banks with actual retail customers, it's 24 hours to clear when deposited with another US bank or any Canadian Bank.
Many US residents also pay a large fee, perhaps $15 or even $25, to cash a Canadian check from a Bank. Again, this is because they can. The Bank itself don't pay any higher fee to clear the check than if it were drawn on a US bank. They just have a revenue method they can exploit.
With checks from countries other than Canada, there can be fees, because you can't be sure (in fact its not likely) that it's registered and integrated with the US Federal Reserve clearing system.
(Credit Unions in the US and Canada have their own clearing systems; they also are 24 hour or less but sometimes there is an additional 24 hour period to move to the clearing system the Banks use).
Some US banks deliberately take a long time to clear; one example are checks issued by rebate firms who use these specific small banks with few retail customers for their transactions.
I'm saying the above to make it clear that a "hold" has nothing whatsoever to do with "the money".
If the check is bogus in any way whatsoever, and that includes checks that clear due to error, the Bank is never, and I repeat never, going to eat that cost. They are going to charge it to you, and it WILL come out of your account, or cause a debt to the Bank to be created.
That can happen anytime ... days or weeks after the check clears, after the hold is lifted, and after you have spent the money.
We had a situation last year where a large German bank simply quit at Noon one day with it's Federal Reserve currency trading payments (US$ to Euros). Other banks were still sending them money for currency transactions, but they weren't completing the transactions.
In that case, the Banks themselves were caught in what amounts to the same thing that happens if you are given a bogus financial instrument you deposit to your account. And just like you, the Banks had to eat the loss.
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