How does a bank know what currency a cheque is in?

January 18, 2020 9:09 PM

I got a compensation cheque from American airlines for being bumped from a flight. It doesn't say USD anywhere on it. How will my Australian bank know that it's USD not AUD?

I asked the guy at the counter who gave me the cheque and he unhelpfully said, "oh, they'll know." And when I asked if he could write USD on it he laughed and said that's not how you write cheques "out here". And then he told me it's not his first time writing a cheque, "love".

(I cash cheques from US publishers at my bank fairly regularly, but they always specify USD or AUD on them.)

So is there any chance I'll get screwed over and only get $X AUD instead of $X USD? And if not, how does the bank know?

posted by lollusc to Work & Money (15 answers total)

> how does the bank know?

My understanding is that, historically, the cheque would need to be presented at the drawee's bank -- i.e. in this case the bank that American airlines uses to issue cheques. So that would give that bank, not your bank, the opportunity to transfer the correct amount in the intended currency. I reckon these days an analogous process may happen digitally.

This may be a good question to ask your bank.

> any chance I'll get screwed over and only get $X AUD instead of $X USD?

I'm not sure, but another way to get screwed over would be the foreign exchange rates used by your bank when converting a cheque from USD to AUD (they'll probably appropriate a few percent there in addition to processing fees).
posted by are-coral-made at 9:26 PM on January 18, 2020

I'm no expert, but I think the currency associated with the check is anchored to the nation the bank is HQ'd in? Like I can't go down to my local bank and ask for a check in drachma from my checking account, I don't think.
posted by vrakatar at 9:37 PM on January 18, 2020 [4 favorites]

Banks occasionally get this wrong so it's worth double checking after the check clears, just to be sure.
posted by mbrubeck at 9:41 PM on January 18, 2020

While I wouldn't doubt that banks could get this wrong, a cheque is tied to an account, and an account is generally only in one currency.
posted by pompomtom at 1:00 AM on January 19, 2020 [7 favorites]

Does your bank have a paying in form for foreign cheques? On those you specify what the currency is.
posted by ellieBOA at 1:14 AM on January 19, 2020 [1 favorite]

If I'd just been told that that's not how you write cheques out here, love, then as soon as I was out of that asshole's line of sight I'd be finding a pen the same colour as the one he used on the cheque, and writing USD on it myself.
posted by flabdablet at 4:33 AM on January 19, 2020 [5 favorites]

I have had cheques from a US dollar account at a Canadian Bank processed as if they were in Canadian dollars despite the fact that they had USD printed on them very clearly. I'm going to suggest that much depends on the bank where you deposit the cheque. The banks that did this were all in the US. Canadian banks have never had a problem sorting out cheques in different currencies for me, although in one or two cases they got originally processed at par and then there was an adjustment that occurred without me contacting them, two or three days after the initial entry when their own ledger was out of balance and got corrected.

Take a picture of the cheque with your phone. If you can go into a bank close to your home that has signs up about how they exchange currency that would be helpful. Don't drop it into your bank machine or send a snapshot in over the internet, put it in the teller's hands and say, "This is in US currency." They may be able to calculate the exchange and make a note of the expected conversion on the spot. Get a copy of your deposit slip showing how the teller noted that the cheque was in US currency and the date and if something goes wrong further down the line you can bring it back to the bank and ask for the adjustment using the picture and the deposit slip.

I'm pretty sure that what flabdablet above suggested could void the cheque and you better bet I would spend some part of my trip idly testing every pen I came across for the exact hue of blue or black to try to find a match. But even that and the size of the letters won't help if you run into a bank that doesn't know how to process foreign currency.

You'll probably be fine, regardless. It seems to be just a few insular banks that have difficulty with the concept of foreign currency. Most of them will do this properly.
posted by Jane the Brown at 5:31 AM on January 19, 2020 [1 favorite]

Best answer: Every account has a currency. Some banks will handle accounts in different currencies. Most banks do not offer foreign currency accounts as this is a specialty. That means that most Australian banks will assume that any account or cheque is in Australian dollars. This means that they will make the original entry in AUD at par, where it will be sent to the issuing bank who will transfer over the correct amount in the currency of the account the cheque was drawn upon.

The exact moment when the exchange occurs and when the exchange rate is calculated depends on the internal processes of the two banks. Once upon a time the transmission would take place at the end of the week when all non local transmissions took place. This used to matter a lot when exchange rates were fluctuating sharply. I don't work for a bank, so I don't know how it works now, but I would suspect that the bank does not make the transmissions any more often as they used to as they make considerable interest by holding deposits a little bit longer and this is one of the ways they nickle and dime their customers.

There is normally a fee for currency exchange, of course. The fee and the difference between currencies gets calculated and the adjustment is made. Note that you normally do not see the entry made at par, as that is confusing to everyone. Instead the deposit disappears into limbo until it is cleared. In one case limbo for me was over three months when a US direct bank transfer got lost on its way in to a small Canadian bank. If all goes well the bank where you cashed the cheque transmits and crunches the numbers promptly and your cheque will clear two or three days later. It is very likely your teller can tell you how many days it takes to clear a US cheque. At that point the money magically appears in your account and because of the fees which are not shown, it will not match the exchange rate on any day it could have been processed. The teller, again, should be able to tell you how much that fee is so you can figure out exactly what exchange rate they used.

Here in Canada we are now so used to depositing US currency or cheques that many of our deposit slips have a special line on them to enter the US part of the deposit. If your Australian bank has that you can be comfortable that there will be no errors and probably no delay either. When I deposit US cash the exchange is calculated on the spot and the deposit cleared right there.
posted by Jane the Brown at 5:57 AM on January 19, 2020 [1 favorite]

I don’t know what to do about the currency, but I DO know I would complain to that guy’s manager real loud, detailing his demeaning attitude and insulting use of “love” in a professional context. That part would be fun
posted by nouvelle-personne at 9:02 AM on January 19, 2020 [10 favorites]

You’ll want to go into your Australian bank and deposit this with a teller, and let them know it’s a USD check.

The string of digits on the bottom of the check will identify the source bank, and therefore the currency.

Here in Canada, all the major banks offer accounts in Canadian dollars and USD. Some offer Euros, Yen and British pounds. So dealing with foreign checks is reasonably common. You may be able to get an account in USD in Australia.
posted by thenormshow at 9:15 AM on January 19, 2020 [1 favorite]

Former Australian bank manager here. This was 15 years ago, so things might have changed. Generally, if a currency wasn't specified, it was based on location of the branch the cheque was drawn on. I would definitely deposit this in person with a teller, they can then ensure it is deposited with the correct currency.
posted by Kris10_b at 12:13 PM on January 19, 2020

I haven't done it in years, but when my parents in the US sent me cheques for presents, I'd go to the bank and fill out as much of the paperwork as I could, leaving the amount to be deposited blank because I didn't know what the exchange rate would make the amount. I'd then go to the special teller, not just the normal teller, and verbally explain that the cheque was in US$ and needed to be converted. It always took ages but they got it right.

These days when there are fewer tellers full stop (or maybe that's just Commonwealth) it may take even more time while they find someone who can do it, but as long as you explain it should be fine. Sadly it is not one of those things you can just fill out the form, put in an envelope and drop in the slot, you have to put the extra in person time into it.
posted by Athanassiel at 12:45 PM on January 19, 2020

Oh yeah, forgot to mention, there is a fee involved. Of course! Also forgot to say in case it was unclear, I am Australian.
posted by Athanassiel at 12:50 PM on January 19, 2020

Response by poster: Yeah my bank has no physical branches and no deposit slips. I am just supposed to put the cheque in an envelope and mail it in. I've done this before successfully (but as mentioned, those overseas cheques had currency specified on them).

I was just curious about how they realise what currency it is if unspecified and what could go wrong. The assumption that it's in the currency of the originating bank makes sense, and Jane the Brown's answer was helpfully detailed about the process. Thanks!
posted by lollusc at 2:08 PM on January 19, 2020 [1 favorite]

In that case, I would check with your bank to see if they accept cheques in foreign currency. ING, for example, has a page in their FAQ that says they do not.
posted by Athanassiel at 4:57 PM on January 19, 2020