Letter: Why cheques take days to clear

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Why cheques take days to clear

Sir: You have published a number of letters regarding the cheque clearing process, and in particular the time taken for a cheque to clear. The clearing of inter-bank cheques is managed by the Cheque and Credit Clearing Company under the umbrella of the Association for Payment Clearing Services. If a cheque is paid into another account of the same bank, the payment is processed by that individual bank and does not go via the central clearing.

Though cheque usage has been declining as customers move to debit-card and other automated means of payment, on an average day about 8 million cheques are cleared. The inter-bank cheque clearing process operates on a cycle spanning three working days.

From a customer perspective, in considering the time taken for a cheque to clear, there are two important dates. First, the date from which the bank will pay interest on funds deposited into an account (or reduce an overdraft) and, secondly, the date from which funds may be withdrawn. The former will normally precede the latter by one or more business days. It is this point that has led to some confusion.

Cheques which are to be dishonoured (ie payment is refused) are returned by first-class post direct to the collecting bank. Therefore the earliest point at which the collecting bank will be aware that payment has been refused is the morning after the cheque has been presented for payment at the end of the three-day cheque clearing process. For this reason, the banks and building societies will normally not allow customers to withdraw funds until at least the fourth day. This is, however, a matter for the commercial judgement of each institution.

Work has commenced on the automation of the handling of unpaid cheques. In time this will allow the banks to move away from the vagaries of the post and could have the potential to allow customers easier access to funds. Again, this would be a matter for decision by each individual bank or building society.


Head of Public Affairs

Association for Payment Clearing Services

London E2