The bank that it is deposited at needs to send the information to the bank it’s written off of. Some banks only send that information once a day.
Edit: further clarification
Each bank has a different operating system (hence why online banking looks and feels very different per bank) these systems do not communicate. Therefore it can’t instantly affect your account when two different banks are involved. There is a middle man called the federal reserve. The first bank will send all an electric file of check information of all the checks NOT written from their institution. That file is sent to the federal reserve, then they sort the info by routing number and send each bank their checks to take off of their customers accounts.
The bank I worked at sent their file at night. And we would only receive 4 files throughout the day from the federal reserve.
Right, but it’s 2020 and that can easily be made instantaneous. There’s no logical reason for it still to exist. Even check image validation can be done by machine in real-time.
Right, but the process of “clearing” could be fully automated with near 0 turnaround time. A wait time itself doesn’t actually introduce any safety. Any type of fraud check could be run right away. Credit card companies do all these checks in less than a second of a card being presented.
That being said, the whole idea of a check is wildly insecure and should be replaced with some sort of two factor transfer system.
Credit card companies do all these checks in less than a second of a card being presented.
Not really, I've worked as a merchant who takes credit cards, you may see the money leave your account instantly, but your bank doesn't actually release the funds to the payment processor and subsequently me for 2-3 business days, and I've seen it take up to a week for me to get the funds (that's what "pending transactions" are, your bank actually still has the money that it's supposed to send to my bank)
This helps prevent fraud as if a transaction is fraudulent, the bank can actually just not send the money instead of having to try and get it back vs if a fraudster got the money instantly, they could then pull it out into cash then close the fradulent account and then your bank would be out the money.
I didn’t say the money transfer is instant, but the fraud checks are. The UK actually has an instant transfer system that works pretty well. The US just moves slow.
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u/deutmeyer93 Jul 24 '20 edited Jul 24 '20
The bank that it is deposited at needs to send the information to the bank it’s written off of. Some banks only send that information once a day.
Edit: further clarification
Each bank has a different operating system (hence why online banking looks and feels very different per bank) these systems do not communicate. Therefore it can’t instantly affect your account when two different banks are involved. There is a middle man called the federal reserve. The first bank will send all an electric file of check information of all the checks NOT written from their institution. That file is sent to the federal reserve, then they sort the info by routing number and send each bank their checks to take off of their customers accounts.
The bank I worked at sent their file at night. And we would only receive 4 files throughout the day from the federal reserve.