Bank Charges and How this old banking stuff works?

[Michael Browne]

This has been posted on other sites by Natty and I have been asked to post it on CAG

 

PLEASE READ THE INTRODUCTION FIRST

 

This piece is one which was inspired from a number of things that I read across charging sites and I think is common themes running through them. I can explain them and am not looking to justify the why and the wherefore because that has already been discussed at length on ALL charging sites. I do hope to explain things and my perspective is as an employee of one of the Big Four banks. If you want to know the why is it this long or that long, then that is not what the piece is about. Informing someone how a system works enables them to take control or see why the system took control of them. When all is said and done I hope the piece allows you to avoid charges should you have them or advise others about charges.

 

Working Days

 

This is what makes the Bank work and will explain a lot of things as I go through them. The basics is that it is Monday to Friday excluding Saturday and Sunday. The Banks usually state that the funds needs to be in the account the working day prior to the item going out, ie Friday for Monday, Monday for Tuesday, etc,etc,.

Direct Debits

 

This is an agreement between yourself and a company to pay a bill directly from your account usually at an agreed time. You have the right to cancel the Direct Debit. At the bank any Direct Debit that you cancel can be reinstated by yourself providing it is within 90 days of its cancellation.

 

Standing Orders

 

This is a fixed amount payable to a company or individual in which you yourself determine the amount. It can be set up for a minimum 2 payments and there is no maximum. The Standing Order can be amended providing at least two Working Days notice is given. It can be cancelled with the same criteria. A standing Order takes 3 working days to reach its destination unless the other account is at the account holding branch where it will clear overnight.

Debit Card transactions

 

This is where you pay a provider either online/over the phone or at a shop for goods. The transaction should be collected within 3 working days of the payment amount, however I have know it to take up to three months to debit an account(although this is not the norm). This is the most difficult to write because there are so many anomalies that could occur. I have read that all solo card transactions are checked, but yet the reality is that supermarkets operate floor limits and transactions are authorised automatically without any checks being made apart from the correct pin number. There is a way of automatically authorising a transaction with the terminals themselves by pressing a button.

With regards to refunds onto cards, the retailer has up to 21 days to put the transaction through even if there is a gap of only minutes between the debit and refund.

There is cases of what is called 'ghost' transactions. That means that the company has appeared to debit the account and yet the money reappears in your account. This means that the transaction has not been done properly and usually will mean it being debited a few days afterwards.

There is cases of transactions being authorised but the individual being told it has been declined. There is a third party in this transaction which is the merchant. Transactions authorised usually will drop off the system within 3 working days as that is the timescale they have to process the authorisation code.

Cut Off Times For Internet Banking

 

I did get bored looking at this one but the cut off point for banks payments as standard is around 7pm which means that rather than taking three Working Days it will take four instead. Transfers between accounts will go through straight away although banks have written in their terms and conditions that payments made prior to 3:30pm will determine if Direct Debits/Standing Orders or cheques will be paid the following day.

 

Cheque clearing and the reality

 

Cheque clearing is a controversial topic because there is the cheques clearing outwards and inwards. I will explain this. When you pay a cheque into your account it takes 3 working days to clear a cheque. This means it is processed and then is received by the other bank on the third working day. However, the cheque can be returned on day 4 and day 5. That means when you ask a cashier when the cheque will clear they will tell you 5 working days. The funds are available to draw from the ATM after day 4 and it is unusual that the cheque is returned. That is the basics of cheque clearing when paid in. What happens though when you give someone else a cheque? Well, the cheque is paid over the counter and can be debited as early as the third working day.

THE EXCEPTION: If a cheque is cleared in house which effectively means that a cheque drawn by an account holder of the same bank and paid into that bank will clear overnight. So for example, you have an account with Birmingham A branch and the account holder is Birmingham A branch and the cheque is paid in at Birmingham A branch, it will clear overnight.

Special Clearance DOES not clear the cheque quicker, merely tells you if it would be paid. Bankers Drafts do not clear any quicker and are the same as normal cheques except they are guaranteed to clear. Building society cheques are the same as well. Please note that BANK DRAFT fraud can be common as well so if in doubt pay for SPECIAL CLEARANCE

Transfers during the weekend

 

Transfers made during the weekend are shown immediately on the balance but when you receive the statement it shows that it was made on the Monday, why? Well, if you have seen the Working Days piece at the beginning of this article it is explained that Saturday and Sunday are not counted as working days. So it will go through straight away but it will show that it was made on the Monday, that is the same for online transfers made after the cut off points, it will show the following day.

 

Cash paid in during the weekend

This will have no impact on any items due to go out over the Saturday Sunday or Monday.

 

[yourbank]

Thank you Michael for posting what I suppose I should call, version 1 of this thread. I have a draft version 2 and I hope you guys can makes some comments as to perhaps things I can include. THis one is NOT NatWest specific and I have tried to make it a neutral as I can so I have taken out things that could be bank specific.

Thanks in advance

 

 

Working Days

 

This is what makes the Bank work and will explain a lot of things as I go through them. The basics is that it is Monday to Friday excluding Saturday and Sunday. The Banks usually state that the funds needs to be in the account the working day prior to the item going out, ie Friday for Monday, Monday for Tuesday, etc,etc,.

 

Direct Debits

 

This is an agreement between yourself and a company to pay a bill directly from your account usually at an agreed time. You have the right to cancel the Direct Debit. Some banks will allow you to reinstate the Direct Debit if it is done within a short period of time. Any mistakes or errors by the bank or the company themselves is covered by the Direct Debit Guarantee Scheme.(part 2).*

Standing Orders

 

This is a fixed amount payable to a company or individual in which you yourself determine the amount. It can be set up for a minimum 2 payments and there is no maximum. The Standing Order can be amended at any time but banks may have minimum timescale prior to the payment being sent for it to be amended or cancelled.

 

Direct Debit Guarantee Scheme

 

The Direct Debit Guarantee Scheme overs all banks and Building societies. It states that : (1) If there is a change to the amount to be paid or the payment date, the person receiving the amount(the originator) must notify the customer in advance. (2) if the originator or the bank/building society makes an error, the customer is guaranteed a full and immediate refund of the amount paid. (3) Customers can cancel the Direct Debit at any time by writing to the bank or building society.

 

Debit Card transactions

 

This is where you pay a provider either online/over the phone or at a shop for goods. The transaction once it has been authorised via CHIP and PIN machine, is valid for up to 6 months, however, usually it is debited from the account within 2 to 3 working days and the funds set aside by the bank for the transaction.

With regards to refunds onto cards, the retailer has up to 21 days to put the transaction through even if there is a gap of only minutes between the debit and refund.

There is cases of what is called 'ghost' transactions. That means that the company has appeared to debit the account and yet the money reappears in your account. This means that the transaction has not been done properly and usually will mean it being debited a few days later.

There is cases of transactions being authorised but the individual being told it has been declined. There is a third party in this transaction which is the merchant. Transactions authorised usually will drop off the system within 3 to 5 working days as that is the time scale they have to process the authorisation code even though it is valid for 6 months.

There are cases in which if the goods are damaged, do not arrive or you do not get the service you paid for, you will able to ask the bank for a chargeback. This applies to Visa Debit cards specifically. Here is a link to the bbc article

BBC NEWS | Programmes | Working Lunch | Visa debit card refunds

 

The clearance of Cheques.

 

When you receive a cheque it needs to be paid into an account so that the cheque clears and the money is effectively transferred from the sender to you. This is called the Clearing Cycle. The basic clearing cycle is only 3 days, however banks and building societies work under the rules called 2-4-6 or for some savings accounts 2-6-6. I will try and explain this and what is happening on the ground.

 

DAY ONE: Cheque paid into the account and processed by large centralised Voucher Processing Centres) This is known as Transaction Day.

DAY THREE: The cheque is debiting the drawer's account and may show up as cleared in the bank. The cheque is cleared for interest purpose. This is known as Transaction Day plus 2.

DAY FIVE: You can withdraw the money. This is known as Transaction Day plus 4.

DAY SEVEN: At the close of business on this day the cheque cannot be returned. This is known as Transaction Day plus 6.

So the reality: Day One=Monday, Day Three=Wednesday, Day Five= Friday and Day Seven=close of business Tuesday the following week.

 

Source: http://www.apacs.org.uk/payment_options/documents/ChequestheFacts2007FINAL.pdf

 

Faster Payments Service

 

Since the 27th May 2008 a new service has been provided called Faster Payments which are transfers bank to bank which take approximately 2 hours. The founding members are: Abbey, Alliance and Leicester, Barclays, Citi,

Co-Operative Bank, Clydesdale and Yourkshire Banks, HboS, HSBC, LloydsTSB, Nationwide Building Society, Northern Bank, Northern Rock, NatWest, Royal Bank Of Scotland and Ulster Bank.

 

The current situation is that payments via telephone banking and online banking will go within 2 hours as a faster payment. It is anticipated that, at the time of writing this, that Standing Orders and Credit Card payments will be fully operational by the end of 2008, if not earlier.