Log in

No account? Create an account

Previous Entry | Next Entry

"Floating" checks no longer applicable

"For a hamburger today, I shall gladly pay you Tuesday."

Anyone still using the old "lemme write a check on Wednesday, because when it clears on Friday, I'll have the money in my account" method will begin suffering as of right now, due to a new law being passed, and the press, being tight-lipped about it. A new law affecting "grace periods" between when you write a check and when it's processed is going to be catasrophic for people (like me) who don't have that extra $40 per bounced check to pay. Of course, I don't write checks (rarely), so this doesn't apply to those of us who do business on the 'net. However -- for those who own their own businesses, write hard-copy checks, and balance the old checkbook, you might want to read this, as it will certainly affect you.

Say Goodbye To That Floating Check
As old checking rules fall, so should bad checkbook habits

It may be a good thing that more kids are using debit cards these days, because most parents couldn't teach them about managing a checking account.

Checking rules change
The problem is not so much that most adults fail to balance their checkbook -- although they do. It's that the rules involving checks keep changing. The latest change went into effect last week, and it pretty much ends the concept of "float" that many consumers grew up with. Technically speaking, float is the dollar value of cash balances created by the time lag in processing unpaid checks. For most consumers who grew up before the technological advances of the last decade, float was the time between when you could write a check, and when the debt would hit your account.

Yes, consumers are supposed to have the funds in hand so that their checks clear, but people living paycheck to paycheck, or simply trying to match the in-flows and out-flows, could be in a situation where checks clear much faster than they expect.

The last big change in this direction came in 2004, with a rule known as "Check 21" for the Check Clearing Act for the 21st Century, and which was designed to make the check-payment system more efficient by making it easier for banks to process checks electronically. With more than 35 billion paper checks being written each year, Check 21 made it so that the physical checks did not have to be moved from one bank to the next.

For many banking customers, the real impact of Check 21 was felt in the statement, where they stopped getting canceled checks returned and instead received "substitute checks" that amount to a picture -- usually smaller than an actual check -- of the written document. The next step in the evolution towards a cashless society -- or at least one without checks -- came with the implementation of something called the "accounts receivable conversion." This system made it so that if you pay a bill by check, the recipient can convert it into an electronic payment; the check does not necessarily show up in the next monthly statement, replaced by an entry showing the amount and the debit.

All of which leads to the latest change, one virtually ignored by the media, that retailers were able to start implementing Friday.

Compare Rates in Your Area
It's called "back office conversion," and it's similar to the accounts receivable method, except it now can apply to paying by check in person at a store. In the past, stores would accept checks, take them into the back office (hence the name) and make a daily trip to the bank (or use a courier service) to get them cleared. Now, the checks can be converted in the back office into electronic payments.

This means goodbye, 48- to 72-hour grace periods; your payment will reach the bank during the day or at day's end, and absolutely overnight.

Translation: Goodbye float. No more making a purchase on Saturday by check, and expecting that the check will not clear before Monday or Tuesday at the earliest.

Patterns Changing
As with the previous changes to checks used to pay bills, consumers will get a record of the check on their bank statement and they can get a copy of the check that will have legal standing if it needs to be used for tax or other purposes.

Checking Account Basics
Whether you are shopping for a traditional checking account or an online checking account, here's everything you need to know about fees, account types and more.

The original check is likely to be destroyed after 30 or 60 days. (Many checks already are incinerated or shredded in this fashion, but there is no change in the rules that financial institutions must keep a clear representation of your check for seven years.)

Analysts believe consumers aren't hearing much about back-office conversion because it doesn't alter consumer behavior; it simply impacts their ever-shrinking ability to play the float. Moreover, retailers will decide just how widespread the change is; given the cost and time savings most retailers would expect from the change, many retailers, especially the big ones, will make the move.

The good news for consumers is that no one expects them to pay additional fees for writing checks, at least not yet. If anything, by reducing the cost and effort for a retailer it may encourage more of them to accept checks; all of the previous reduction in float times have been shown to reduce the number of checks written against insufficient funds, a very real benefit to both sides of any transaction.

Check-writing patterns have been changing in recent years, with consumers becoming much more accepting of debit and credit cards, online payment systems, electronic bank access and more. Analysts think that trend may be expedited by back-office conversion.

This might bring some consumers to the conclusion that a lot of people have already reached -- that their debit or credit card does the job just as well -- or better -- than their traditional check. Anyone who has used the float as a form of short-term financing should instead be looking for overdraft protection or should curtail spending and step away from the edge of a financial precipice to avoid the heavy fees banks now charge for rubber checks.

Floating has been in retreat, and this will push that process along a little further. It has always been risky, but now people should know that they just can't count on any real float time at all.


Greaaaaaaaa t. Anyway, this is one of those "must shares" with anyone who reads this page, since I know many -- just like me -- are indeed financially suffering right now. We certainly don't want to add insult to injury. At least we've been given a "grace period", but no one is saying for how long. Bottom line -- just don't write checks and count on the automatic deposit or ANY deposit taking care of it a day or two later. Very unsafe now.

Weee. Lovely way to start Saturday!

This has been yet another loverly PSA #113.


( 12 whispered — Whisper to me )
Mar. 24th, 2007 02:59 pm (UTC)
You can still write (or type) a draft note* on standard paper, and get the float.

They can't generally handle the 'standard' 8-1/2 by 11 inch paper electronically.

You *do* know how to write a draft note, right? It's what checks used to be before the fancy pre-printed ones were invented.

*A 'Draught Note' for our friends in Canada and the UK.
Mar. 24th, 2007 03:06 pm (UTC)
I DOOO know that you can also write a draft on a piece of toilet paper. But I'd love to see you go into /my/ bank and haggle over it with them.

That's not the point. The point is that the law changed, and check-writers will be affected (or those who count on the float).

Mar. 24th, 2007 03:36 pm (UTC)
Well, good; I know so many people who never knew there was anything other than the pre-printed types of checks.

They won't haggle over something typed up on standard office paper -- They aren't legally permitted to do that. They'll have to process it manually.... which causes delay, which effectively gives you the float.
Mar. 24th, 2007 03:51 pm (UTC)
Well, I'm sure those very same people have little interest in history :)

Still -- a vendor reserves the right to deny such a form, particularly smaller ones. The hassle wouldn't be worth it. For now, they're not charging overdraft fees, but that's coming soon after. An obvious problem for a lot of people.

I don't discuss "legal instruments" like this with my tiny circle of friends; but I'm pretty sure they all knew about checks before checks were easy and printed. Maybe not. I /am/ a research freak, and my research tends to wander off into directions most wouldn't care to explore, much less have even a moderate interest in :)
Mar. 24th, 2007 03:23 pm (UTC)
I thought this had already passed, maybe 2 years ago or so? I've sent cheques up to Canada and they've been cashed and cleared 2 days after the deposit. Harder to tell locally though, since I write maybe 2 cheques a month, one goes out by mail, which is still as quick and reliable as it ever was, and the second is given to a person who is hit or miss on when the deposit is made (actually, she's pretty much hit or miss on her entire life, but that's not really the point - or is it?).
Mar. 24th, 2007 03:27 pm (UTC)
No...Check 21 was a little more than two years' ago. This just passed this week.

Of course, I have no idea what, if any, impact this will have on commerce with other countries; but state to state, I'd imagine this would make those who do stick with hard-copy checks more conscious of what they spend and when.

I dunno about hit or miss chicas. LOL =D Is this a child-support/alimony thang? Nvrmnd. Don't answer that one ;-)

It's good to see you! You never update anymore, and you are, after all MY FIRST EL JAY FRIEND EVERRRRRRRRR =D That makes you kinda cool ;)
Mar. 24th, 2007 03:47 pm (UTC)
Our local Tag Office and Wal-Mart both have a machine that scans your check and removes the money automatically from your account the same way as a Debit Card.

After they scan you sign another slip of paper and they give you your check back.

Mar. 24th, 2007 03:54 pm (UTC)
Ayeeeeeee! Leave it to Wal-Mart to be at the cutting edge of "making it easy to spend"! LOL :)

I can't go to Wal-Mart; too large, too much of a walk, etc. etc. Too many people, as well. Crowds -- in the past five years -- have started making me nervous. Ugh. I dunno how you handle it. I just cut the helliaaa out of coupons these days, and thank GOD that Publix has double-coupon days and $5-$10 off purchases of $30 or more (yay!). I HATE having to worry about money like this. Blah.

But I digress (as I often do). How've YOU been? It's odd that those who typically don't comment are commenting today. LOL :)
Mar. 25th, 2007 12:22 am (UTC)
Actually, I think Wal-mart was getting burned by rubber checks. So they changed their system to auto-debit your account.

I'm doing alright. I don't post a lot but I read my friends page somewhat regularly, I do miss some posts though and I don't always comment either.

Mar. 25th, 2007 12:39 pm (UTC)
Yep, you've been quiet lately. I haven't had time to read my /friend/ page. Argh. I have no idea what's up with who these days.

I'm sure that was one of the reasons (Wal-Mart doing their thang) that this new law is in effect now. I'm glad to hear you're doing well.
Mar. 24th, 2007 05:18 pm (UTC)
Ah, I remember the "good ol' days" back in college...

Now we write one check a month for our rent - everything else in on the card so that we get miles or transferred electronically from the bank...

oh how times have changed...
Mar. 24th, 2007 05:21 pm (UTC)
No joke. My RENT is automatically, electronically debited each month. I can't think of /any/ time I've written a check in the past year.
( 12 whispered — Whisper to me )


Eye see, Open your eyes
Creeping Through The Cellar Door

Latest Month

June 2019


Here is Belladonna, the Lady of the Rocks,
The lady of situations.
Here is the man with three staves, and here the Wheel,
And here is the one-eyed merchant, and this card
Which is blank, is something that he carries on his back,
Which I am forbidden to see. I do not find
The Hanged Man. Fear death by water.
I see crowds of people, walking round in a ring.
Thank you. If you see dear Mrs. Equitone,
Tell her I bring the horoscope myself;

One must be so careful these days.
Powered by LiveJournal.com
Designed by Paulina Bozek