Understanding the Delay: Why Does It Take Five Days for My $22,000 Insurance-Claim Check to Clear?
Have you ever wondered why it takes so long for a check to clear? One curious customer recently reached out to MarketWatch’s Quentin Fottrell to get clarification on this matter. The customer had received a $22,000 insurance-claim check from Bank of America, but was surprised to find out that it would take five business days for the funds to be available in their account. In this article, we will explore the reasons behind this delay and shed light on the mechanics of paying by check.
When a bank takes time to process a check, it is primarily done to ensure the check’s validity. Checks are susceptible to fraud, and banks need to take steps to protect their customers. In fact, the Better Business Bureau recommends signing checks in black gel ink, as it is more difficult to tamper with than regular blue or black pens. This small precaution can help prevent check fraud.
Checks are considered an old-fashioned payment method and rely on more archaic processes to clear. According to a Bank of America spokesperson, holds can be placed on checks for various reasons, such as concerns about the validity of the check or the amount being deposited. These holds allow the bank time to research and verify the check, including contacting the maker of the check if necessary.
Furthermore, paper checks rely on a legacy network to process and return them. This network can contribute to delays in clearing checks. For instance, an income-tax refund can take anywhere from three to eight weeks to arrive. The paying bank has a certain amount of time to verify the validity and authorization of the check. Until this is established, it would be unwise for the bank of deposit to withdraw money based on the check’s amount.
Federal law also allows banks to hold some of the money for a period of time, depending on the type and amount of the check. For a check like the one in question, banks generally make the first $5,525 available by the second business day after the “banking day” of deposit. However, amounts over $5,525 may be held for longer periods.
The delay in clearing checks is not only due to security measures but also to protect customers from scams. One common scam involves consumers being fooled into cashing a check for a third party. The scammer tells the person with a U.S.-based bank account that they inherited a large sum of money but must deposit the amount and wire a portion of the funds back to receive a commission. Unfortunately, the check is returned, leaving the customer responsible for the withdrawn funds.
If you ever fall victim to a scam, it is crucial to act swiftly. Contact your bank, file a police report, and put a fraud alert on your credit reports to prevent further damage. Even if you are fortunate enough to have the money returned, it could take months to resolve the situation.
In conclusion, while it may be frustrating to wait for a check to clear, it is important to understand the reasons behind these delays. Banks have processes in place to ensure the validity of checks and protect customers from fraud. Additionally, paper checks rely on a legacy network that can contribute to delays in processing. By being aware of these factors, you can have a better understanding of why it takes time for your money to become available.
Congratulations to the curious customer on receiving their $22,000 insurance payout. Whatever the purpose of the funds may be, we hope they are put to good use.
