Cheques, although in declining use, still generate complaints, usually about how long it takes to clear funds. A cheque, once deposited, can take three to five working days to clear, and even longer for overseas cheques. If you deposit a cheque into your account, check with your bank that the money has cleared before you consider it yours.
How cheques are cleared
When you deposit a cheque issued in New Zealand, your bank will credit the cheque amount to your account. This doesn’t mean the money is immediately available for use, so you won’t be able to withdraw it or transfer it to another account straightaway.
On the same day you deposit your cheque, your bank will send the cheque details electronically to the issuing bank, which has until the end of the next working day to decide whether to pay or dishonour the cheque.
If the cheque is honoured, you can access the funds by the end of the next working day. The issuing bank can’t reverse or dishonour the payment after this time.
If the cheque is dishonoured, the amount credited to your account will be reversed. This is why it is important not to consider the funds yours until they have been cleared. Reasons for dishonouring a cheque include that it is stolen or there is not enough money in the account to pay the cheque.
The clearance process for foreign cheques is different and takes longer than three working days.
Check with your bank that the money from a cheque deposit has cleared before you consider it yours.
Car seller took the risk in accepting cheque
Morgan sold her car privately. The buyer deposited a $10,000 cheque into her bank account and gave her the deposit receipt as proof he had paid for her car. Morgan, thinking the buyer had legitimately paid for the car, let him drive it away.CASE 2
Bank entitled to ask for ID to cash open cheque
Hana tried to cash an open cheque for $800 at her local branch. A staff member asked her for identification. Hana refused, believing the bank had no right to this information in order to cash an open cheque. The bank declined to cash the cheque, saying its policy required those presenting such cheques to supply identification.CASE 3
Bank ignored instructions by allowing early cashing of cheque
Hamish hired a contractor to do work on his property. He gave the contractor a post-dated cheque for $500. Hamish’s bank allowed the contractor to cash the cheque before the specified date. When the contractor failed to complete the work, Hamish complained to his bank that it shouldn't have honoured the cheque before the specified date. The bank offered to reimburse the $500, but he declined the offer and complained to us.
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New Zealand banks don't have to accept cheques from overseas, and may not accept them from some countries, so check with your bank before taking a foreign cheque as means of payment. Foreign cheques take longer to process, and don’t go through the New Zealand cheque clearance system.
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