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Why do checks take so long to cash at the issuing bank?
November 14, 2011 7:18 AM   Subscribe

Why do checks take so long to cash at the issuing bank?

I have a payroll check which is issued from a regional bank. I often go to the issuing bank to cash the check, and then deposit the cash in my personal bank to skip the clearing period.

Whenever I attempt to cash the check, I have to provide an ID, but this is understandable. However, the amount of time needed for the transaction to take place is excessive. When I am waiting for a check to be cashed, 5-10 minutes usually passes by. The teller looks to be waiting on something, but I am uncertain about what. Does anyone have any idea on what is taking so long, especially in this day and age?
posted by Lugos to Work & Money (6 answers total)
The bank you're going to sucks. My experience is the teller needs less than 5 seconds for the till to open and start counting out my money. Unless you're cashing checks for huge, huge amounts (requiring some sort of anti-crime federal thing), it should be instantaneous. You should ask the teller.
posted by birdherder at 7:32 AM on November 14, 2011

You could just ask the teller what the delay is, but, my guess would be that the account that your payroll is drawn from is a ZBA (zero balance account) in which the account is kept at zero and is only funded from another account of your employer's as checks are presented for payment. This practice is common, especially in larger businesses.

When the teller looks at the account to see if there are sufficient funds available for the check, they would see either a zero balance or even a negative balance! That being said, there should be some indicator on their screen telling them that this is a zba account.

So my educated guess would be that the teller is checking the main account as well as the payroll account to see if there are available funds, and this may be taking some time depending on their computer system.
posted by Hanuman1960 at 7:37 AM on November 14, 2011 [1 favorite]

Is the check over $10,000? I believe checks of that size trigger some anti-terrorism nonsense about reporting to the FBI.
posted by COD at 7:43 AM on November 14, 2011

I was going to make the guess about a ZBA as well.

Also, my experience with financial systems is that a lot of them are not truly real-time systems even today. Many of them are batch processing systems, only with the batch frequency turned way up in order to simulate real-time processing. E.g., the check clearing system might have originally been designed to run once, at night, but now they have better hardware so they just run it every five minutes rather than actually redesign it to be on-demand.

So it could be that to clear a check like that, which involves moving money from the business' real account into the ZBA and then drawing it out to pay you, the teller has to wait for some sort of batch process that only occurs every few minutes. Hence you both sit around for five minutes, while some overgrown cron job takes its time and processes the transaction.

What's unfortunate is that back when the core systems at banks only ran once a day after the close of business, there were a lot of processes for tellers or officers to handle transactions offline. Paying an "on us" check would almost certainly be one of them. But as banks have automated, they have in some cases eliminated these offline systems in favor of forcing employees to run everything through the computer. Hence, it can actually take longer to complete a simple transaction today than it would have 20 years ago. (It's also been my experience that bank officers no longer have as much authority as they used to, when a branch was basically disconnected from the rest of the bank until reconciliation at the end of the day.)
posted by Kadin2048 at 8:22 AM on November 14, 2011

I have a couple of guesses as to what is happening here:

1. It is a ZBA account and that causes the teller some confusion

2. From the bank's perspective, this is a higher-than-normal-risk transaction. Since you're not a customer of that bank and you're walking out with cash, the bank has no recourse if they find out later it was a fraudulent transaction. They just have to hope that you weren't using a fake ID, and that the police can be bothered to do something with it (they often can't).

With that in mind, the teller might be taking some extra steps to verify that everything is kosher. There might also be some kind of verification tool that the bank uses with this customer that verifies that they wrote the check. Since you're cashing it on the same day it was written it might take a little bit of extra time to verify it.

The other question is, why don't you have direct deposit?

Besides, most banks have next business day funds availability so, even if it takes a few days for the check to work its way through the system, they give you access to the funds the day after you deposit it. If you bank takes longer than that, you might want to find a different one. Secondly (and I don't mean this to sound preachy) the couple of days it might take to have access to those funds shouldn't be that big of a deal. Even if your budget is super tight, there are things you can do so that your cash flow is smoother and that few extra days wouldn't matter. This might not be why you want to cash the check at the issuing bank either, I'm just throwing that out there.
posted by VTX at 8:34 AM on November 14, 2011

I have been a supervisor at two different banks in the past.

This is not unusual at all and it does not mean your bank sucks. They are most likely taking certain steps to verifiy the check; many businesses have a program set up where every payroll check needs to be verified in some manner. There are over-the-phone services that do this, so the teller may be verifying in this way.

Other possibilities include that the check is over the teller's limit and needs an override, or that there has been a lot of check fraud on that company's account. The teller may be pulling up previous checks that have been cashed and are visually comparing them.

There of course may be a zero balance account involved as well. Depending on the bank's system (some large banks have suprisingly archaic systems) verifying all this could take easily take 5 to 10 minutes.

it should be instantaneous

No, it shouldn't. A bank isn't a McDonald's; they are giving out customers' money. The bank has certain responsbilities.

A 5 or 10 minute wait for you is the difference between the teller having a job and getting fired. Get direct deposit if you don't want to deal with tellers doing their jobs.
posted by spaltavian at 9:03 AM on November 14, 2011 [7 favorites]

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