Cheques are still a popular way to transfer money from one account to another, but they take time to clear. Understanding the clearance process and its timeline is essential for making sure payments are made on time.
Understanding Cheque Clearance
When a cheque is written, the payment is transferred from the drawer’s account to the drawee’s account. The drawer is the person writing the cheque, while the drawee is the person receiving the cheque. The clearance process is the time it takes for the payment to be transferred and for the drawee’s bank to verify that the funds are available.
The clearance process involves three main steps:
- The drawer’s bank sends the cheque to the drawee’s bank for verification.
- The drawee’s bank verifies the funds are available, and transfers them to the drawee’s account.
- The drawee’s bank sends a confirmation to the drawer’s bank, notifying them that the payment has been made.
How Long Does It Take?
The time it takes for a cheque to clear depends on the type of cheque and the institutions involved. Generally, local cheques take two to three business days to clear, while inter-bank cheques can take up to seven business days.
In some cases, the process may be accelerated by the use of cheque truncation. Cheque truncation is the process of electronically processing cheques instead of manually processing them. This can reduce the time it takes for a cheque to clear from several days to a few hours.
Cheques are still a popular way to transfer money, but they take time to clear. Understanding the clearance process and its timeline is essential for making sure payments are made on time. Generally, local cheques take two to three business days to clear, while inter-bank cheques can take up to seven business days. Cheque truncation can reduce the time it takes for a cheque to clear from several days to a few hours.
