Be aware that if you bank a foreign cheque you get for Christmas it may take longer to process, says Banking Ombudsman Nicola Sladden.
The Banking Ombudsman Scheme has just released a Quick Guide to Foreign cheques explaining how foreign cheques are cleared, the most common types of complaints about them, and how to spot a foreign cheque scam.
“We receive complaints every year about foreign cheques. Even though there are quicker ways to transfer money overseas, there are people out there who still like to send cheques.
“First, be aware that New Zealand banks don’t have to accept foreign cheques so confirm with your bank that it does before you agree to a foreign cheque as payment,” Ms Sladden said.
Foreign cheque clearance can vary from bank to bank and sometimes catches people out because the New Zealand bank might:
- deposit cheque proceeds into its customer’s account, but the overseas bank can dishonour the cheque if the overseas account is overdrawn or the cheque was stolen, in which case the money is taken back
- place a hold on cheque proceeds for a time meaning the customer here can’t access the money, and it’s still possible after the hold period ends that the cheque could be dishonoured
- debit the customer’s account for an amount greater than the original cheque if the exchange rate has changed in the event the cheque is dishonoured.
An alternative processing method is for the New Zealand bank to send the foreign cheque back to the overseas bank for processing, often when the cheque is for a large amount. This means the New Zealand customer has to wait for the overseas process to be completed before the amount is deposited into their account.
“Foreign cheques are also popular with scammers. We recently investigated a case in which a man was duped by a supposed girlfriend overseas who asked him to bank a foreign cheque because she had no bank account.
“The complainant’s bank put a 21-day hold on the cheque proceeds but the girlfriend insisted she needed the money quickly, so he took out a $10,000 loan for her. The foreign cheque was subsequently dishonoured and our complainant was $10,000 out of pocket. The bank had explained to the customer that the cheque could still be dishonoured after the 21-day period,” Ms Sladden said.
Our Quick Guide to Common scams targeting bank customers has more scam information.
Media contact: Emma Reilly 021 195 9559