Posted on 10/17/2004 9:51:13 AM PDT by SmithL
Electronic transmission means banks will debit accounts in just minutes
John Cailleau writes his rent check two days before his monthly Social Security payment is deposited into his account. Daniel Shiner used to keep ailing firms alive by shifting funds between accounts to artificially pump up their cash flow.
The two Bay Area residents represent millions of Americans who have juggled their finances by playing the float -- that is, writing checks on money that isn't in their accounts, on the bet that it will be there before the checks are cashed.
But the float will get a little less buoyant starting Oct. 28, when banks can begin to debit accounts using substitute checks that are an image of the original check. Banks will be able to transmit these images via electronic networks, instead of having to ship the original check.
(Excerpt) Read more at sfgate.com ...
It's real simple, don't spend money you don't have in the bank...
Should of done this 8 years ago or so with the House Banking system..wonder if it will affect them now?
They will debit the accounts in seconds or minutes, but guess what?...the funds will still float up to 72 hours...and the FED will make billions like they always have on the interim...
Mark my words...the only thing that got sped up is the debit, not the credit side of the equation...
Now instead of the secret and private fleet of Leer jets providing a physical float for the feds, the feds will just float you that much faster...
The whole thing is a crock of crap...
Do this...send a check to a friend across the country...when he gets it and is ready to deposit it, watch your accounts together...you will lose access to the funds immediatley, but he will still have to wait up to 72 hours or more...all that free float goes straight into the FEDs account...
Friggin scam
agh...
ARM fees=ATM fees
I have no problem with this proposal whatsoever, except for the nagging feeling that deposits will continue to linger in limbo for a few days.
With absolutely no justification for it.
This has got to be the result of a recently passed law permitting the practice, or an administrative decision which is obviously one-sided.
Time to contact our (*snicker*) representatives to level the playing field?
What really bothers me about it is that physical checks will no longer be returned to you even if you want them. At any point in the chain, a bank can destroy it (yes, destroy the origional), and put in its place an electronic "substitute check". I don't like this at all. There is a reason I write checks for some things rather than just do electronic banking for bill paying. I like the rock-solid perminacy of the check itself. It makes record-keeping a breeze, and makes it incredibly easy to prove payment in case of a dispute.
I've written about this on several threads that have popped up related to this issue, but I'd like to lay it out to y'all one more time to illustrate my perspective:
This year I ended up having to go to court because my ex-wife was trying to defraud me by telling the state that I'd not sent all of the child support that was owed. I started getting nasty-grams from the State of Texas claiming I owed $28,000+ in back child support. This was very uncool IMO, as it was just patently not true. Yet, she'd been able to get the state of Texas to come down on me, (for free because this was prosecuted by the Attorney General's office - not her own lawyer), using nothing more than her undocumented claim of non-support.
What does this have to do with checks? Well, I'll tell you. I showed up in court with a copy, front and back, of just about every single check I'd written her over the past four years. It was a stack of documentation that included account statements, checks, and everything else that I could find. I was able to prove, beyond any shadow of doubt that not only was I most decidedly not in arrears, but I'd overpayed to the tune of almost $10,000 over the past for years.
It was a major endeavor to comb through all my old statements and checks to put this together, but it was possible only because I had the checks in my posession. Without them, I'd be up the creek because the state had never bothered to ask her to show that she'd not recieved it. (A copy of her bank statements would have indicated regular payments.) With the physical checks, there was no ambiguity. She'd accepted the checks, and yet lied to the state about it. (Note that the state has no interest whatsoever for some reason in prosecuting her for her misrepresentation or her attempt to defraud me.)
If this "Check 21" (which is the informal name for these new regulations), had been in place over the past 4 years, I'd have had a much more difficult time putting my case together. I would have had to pay the bank a research fee to search through old "substitute check" documents that they had on file, which would have been incredibly expensive, and probably not nearly as effective as what I ended up coming up with. Also, if more than 7 years worth of records had been required, I'd have been completely SOL as that's all that they normally keep on hand, whereas I keep everything.
I've done some research about Check 21 the past few weeks though, and it is not absolutely as bad for me as it initially appeared. My bank (BofA) has stated that for those who still require the checks to be returned to them, they'll print the "substitute checks" and send them with statements. The substitute checks will have the same legal status as a cancelled check would, though of course, they won't be the original. I'm sure I'll end up paying through the nose in service fees in order to continue to keep hardcopies of my checks, but for me, having them has already saved my rear end once. You never known when that will happen again!
It takes discipline, however. If you're one day late with your monthly payoff, you get hit with interest (typically 1½% of your total purchases) plus a penalty for failing to make the minimum payment on time.
This has already been happenng for at least 2 to 3 months. Two of my credit cards started doing this and at first I had trouble balancing (online) because they are listed as drafts instead of check #'s. Luckily, I had the cash to cover. My bank will cover anyway, but charge 25.00 if the cash isn't there, which can really add up.
I really hate it. Just another instance of either greed or trying to jump on the cash before someone else gets it.
vaudine
It is the banks that benefit from the "float." A five-or-so-day zero interest loan from you to your bank.
I have seen it work like this:
The Federal Reserve Banks (or branches) take physical possession of the checks, usually overnight. The checks are delivered to the Fed by the commercial banks at like 2:00 A.M.
The banks are paid interest on those funds by the Fed because the Fed takes possession; that interest rate is the "Fed Overnight Funds Rate."
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