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Cashing checks, your place or mine?


My husband recently had a bad experience trying to cash a check, and I thought it was worth sharing. Someone had given him a check drawn on that oh so big bank we all know, and love to hate.

Now, back in the day the thought process was if you went to the bank the check was drawn on, you could get the funds quicker then waiting for your bank to send the check out for collection. And the payor's bank would often cash the check for you without any trouble.

Well, times have changed. It's a whole new world out there.

Financial Institutions have to comply with a myriad of regulations that have been put in place since 2001. Under the US Patriot Act, they must thoroughly identify who they're doing business with, take precautions against money laundering and report certain transactions. The Customer Identification Program of 2003 further defined identification requirements. Under Gramm-Leech-Bliley they must protect any consumer data they do have, disclose how consumer data is used and not retain any consumer data that they don't need. And finally, in 2009 the roll out of the FACT Act added additional requirements to protect consumers against identity theft.

With all of those rules and regulations to follow, I can understand why an institution would be careful about a check cashing transaction. And, why they would charge a fee for that type of service for non-customers.

Add to that the fact that check fraud occurs in the millions of dollars every year.

What does mean to you as a consumer? It isn't as easy as it used to be.

But there is hope.  In 2005, a new set of rules from the Federal Reserve allowed financial institutions to clear their items electronically rather than sending a paper check. This process has expedited the clearing of check items from the old seven days for out of state, to virtually overnight. This means that taking that check to your bank instead of the bank the check was drawn on doesn't make a whole lot of difference the way it used to. And your bank will typically provide availability of the first $100 immediately, and the rest within a day or two.

Your bank will also cash your check if you have enough in your account to cover the check should it be returned to your bank for non-payment.

So start with your bank. They're the ones who know you best and already have your information on file. And don't be shy about asking questions about funds availability. They are required to tell you when your funds will be available so you can plan accordingly.