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Say Goodbye to Check Float: Impact on Checking Rules & Consumers

In summary, The rules surrounding checks have changed, and as a result, "float" is no longer an issue. Old checking rules will fall away, and as a result, many parents will have to get their children to learn about managing a checking account.
dannyzmom
Gold Member
9,321
I am wondering if this will be a big announcement for us at NC...like, will PP have a feature where we can process checks (and even CCs) right away - that'd be so nice...

Goodbye Check Float
As old checking rules fall, so should bad checkbook habits.
By CHUCK JAFFE


BOSTON (MarketWatch) -- 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:
End to Check Float & More




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.


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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.


Today's Avg. Checking Account Rate Type Current APR
Interest Checking 1.43% 1.45%
Checking Account Rate Provided by Bankrate.com
Compare Rates in Your AreaIt'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.

"It is not an instantaneous payment," says Paul M. Connolly, first vice president and chief operating officer for the Federal Reserve Bank of Boston, "but your payment will reach the bank during the day or at day's end, and certainly 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.


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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.)

Connolly believes 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, Connolly figures that 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. Connolly thinks that trend may be helped along by back-office conversion.

"If I go into the same store once a week every week of my life and I start to notice that those checks never come back to me, and that they clear almost as soon as I write them, maybe after some months or years I will say 'Why am I writing this check,'" Connolly says. "Maybe this will 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.

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


Chuck Jaffe is a senior MarketWatch columnist. His work appears in dozens of U.S. newspapers.
 
Good information. I pay everything I can with a debit card and write few checks. I prefer to get payment at shows in the form of a card!!

Unfortunately, people like me are putting my BIL out of a job (he processes checks). The federal reserve has closed a lot of it's centers and is getting ready to close more soon.
 
There is a disclaimer on the new sales receipt that says if you pay by check, PC reserves the right to process it electronically. We are definitely going that direction.

My bank never returns my cancelled checks, only gives me little pictures on my statements.
 
  • Thread starter
  • #4
DebbieJ said:
There is a disclaimer on the new sales receipt that says if you pay by check, PC reserves the right to process it electronically. We are definitely going that direction.

My bank never returns my cancelled checks, only gives me little pictures on my statements.

Yep I noticed that disclaimer as well - I am looking forward to hearing some sort of announcement about this at NC hopefully!
 
Interesting. At this point, PC will not accept customer checks. OH, how I hope they change that and do this! SO easier for us - just put in the information from the check like a credit card and send - no more trips to the bank to cash checks and hope they don't bounce after the products are delivered!
 
BethCooks4U said:
Interesting. At this point, PC will not accept customer checks. OH, how I hope they change that and do this! SO easier for us - just put in the information from the check like a credit card and send - no more trips to the bank to cash checks and hope they don't bounce after the products are delivered!

That would be nice...just enter the routing and acct number and hit send!

But then I wouldn't be able to keep recruiting my teller. She'll have a show or join the business eventually! :)
 
Agh, I am a new consultant well fairly new (2 months) and I have had 3 checks bounce on me so far. One didn't bounce on my end, where my bank re submitted it... but the other two did. This would be a very nice thing to happen.

Oh and yes, I have stopped accepting checks from customers and only getting one from the host(ess) and it must be a local bank. Since my bank, has threatned to suspend my check cashing privlages.
 
dannyzmom said:
Yep I noticed that disclaimer as well - I am looking forward to hearing some sort of announcement about this at NC hopefully!


Ditto !!! Carolyn. Wouldn't this just be the icing on the cake!!!
 
DebbieJ said:
That would be nice...just enter the routing and acct number and hit send!

But then I wouldn't be able to keep recruiting my teller. She'll have a show or join the business eventually! :)
That would be the perfect time to recruit her! She'd be losing a frequent customer.
 
  • #10
BethCooks4U said:
Interesting. At this point, PC will not accept customer checks. OH, how I hope they change that and do this! SO easier for us - just put in the information from the check like a credit card and send - no more trips to the bank to cash checks and hope they don't bounce after the products are delivered!


I'd love that too! I hope this is a sign of what is to come! Sometimes the trips to the bank are inconvenient in the winter.
 
  • #11
This would be absolutely incredible if it happened. I hopre it does. That would make it hastle free!!!
 
  • #12
I would assume if this does happen that they would check for payment like they do with credit cards before they release our orders to the warehouse.
 
  • #13
BethCooks4U said:
Unfortunately, people like me are putting my BIL out of a job (he processes checks). The federal reserve has closed a lot of it's centers and is getting ready to close more soon.
Yeah, there was a lot of business to be had flying cancelled checks around, but it's getting less and less and less these days....
 
  • #14
Oh and I would love it, too! We wouldn't have to track down bounced checks! I've only had one bounce and got the cash, so that's good, but just the thought that it's my responsibility makes Bry crazy!
 
  • #15
I noticed this on the OOF as well! I scratched my head but what you're saying is making sense! That would be awesome!!!:D
 
  • #16
Before I signed up, I was a hostess for a party under another plan. A cousin put a check in the mail, it never showed up, so I asked her to write one to me. It bounced. She insisted the money was in the bank and that something must have happened at the bank.

Also, my stepmother had a check come back on her ... somehow it was my fault for cashing it a week after she wrote it!

Thoset lessons taught me to NEVER cash a check unless funds are verified.

Last week, when I closed a hostess' show, I spent an hour running from bank to bank to bank to bank, just to verify funds. Whenever the bank would let me, I cashed the checks before depositing.

I have found that my account gets hit QUICKLY and wanted to have enough available cash in there for the checks to clear.
 
  • #17
BethCooks4U said:
Interesting. At this point, PC will not accept customer checks. OH, how I hope they change that and do this! SO easier for us - just put in the information from the check like a credit card and send - no more trips to the bank to cash checks and hope they don't bounce after the products are delivered!


That would be awesome! I am an hour away from my bank.
 
  • #18
I have been waiting for PC to ask us for the 3 digit code on the back of the credit cards! This would be a step in the direction of getting rid of checks!
 
  • #19
DebbieJ said:
But then I wouldn't be able to keep recruiting my teller. She'll have a show or join the business eventually! :)


You'll still have cash to deposit occasionally.
 
  • #20
raebates said:
You'll still have cash to deposit occasionally.

CASH??!!?! What on earth is CASH?! ;)
 
  • #21
Around here, it is more common for me to be paid in cash than it is to be paid with a credit card.
Personally, I like cash - no doubts about it clearing, or being declined. But then, I live 2 blocks from my bank - so it's pretty simple to deposit.
 
  • #22
DanielleQ said:
CASH??!!?! What on earth is CASH?! ;)


I actually have stopped taking cash to shows to make change...and don't you know as soon as I did, I had a show with about 15 Shoney's waitresses and they ALL had cash! The good news was that they could make change for each other!
 
  • #23
that is funny...did they pay all in ones? I always take change, but rarely use it because everyone pays with a check. I like cash, but we have a restaurant and catering business and we don't make it to the bank every day...our bank is 30 miles away...and you can only deposit so much cash without the IRS being notified. Most people don't have that problem, but I do on occasion...LOL
 
  • #24
I have groups of people who pay mainly with cash. It just depends on the crowd. I always have a bit of change with me, just in case.
 

1. What is check float?

Check float refers to the time period between when a check is written and when it is cleared by the recipient's bank. During this time, the funds are still considered available in the payer's account, even though the recipient has not yet received the money.

2. How does check float impact checking rules?

Check float can impact checking rules by causing delays in funds being available for withdrawal or by allowing for overdrafts if the payer has insufficient funds in their account. It can also affect the timing of when payments are processed and when fees may be incurred.

3. What are the new rules regarding check float?

As of July 2020, the Federal Reserve has implemented new rules that require banks to process checks electronically, reducing the time it takes for them to clear. This means that funds will be available for withdrawal sooner and checks may be returned for insufficient funds more quickly.

4. How does this impact consumers?

For consumers, the new rules mean that checks will clear more quickly and funds will be available for use sooner. This can be beneficial for those who rely on checks for payments or budgeting. However, it also means that it is important to ensure that there are sufficient funds in the account before writing a check to avoid potential overdraft fees.

5. What are some alternatives to using checks in light of these changes?

With the increase in electronic payment options, there are many alternatives to using checks. Some popular options include online bill pay, mobile payment apps, and direct deposit. These methods often have faster processing times and can help avoid potential issues with check float. Additionally, using a debit or credit card for purchases can also provide a more secure and convenient payment option.

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