The cheque clearing process
All cheques written and received by you go through the clearing cycle, a system used by the main British Banks to transfer money between accounts.
The clearing cycle used by the main banks changed in November 2007 and is now often referred to as the ‘2-4-6’ process (or ‘2-6-6’ for deposit accounts) as it sets a maximum time limit of two, four or six working days for each stage of the process after paying in a cheque.
This is how it works –
If you pay a cheque in on a Monday morning:
- You start to earn interest on it from Wednesday at the latest or it starts to reduce the interest charged on an overdraft (+2 working days). Please note that the Shariah accounts are excluded, as no interest is payable.
- You can use the money, for example, withdraw cash or make payments, by Friday (+4 working days) – although the cheque could still be returned unpaid. Funds will normally be available through all channels such as ATMs, Internet and debit cards (sixth working day for savings accounts).
- By the end of the following Tuesday (+6 working days), you can be certain that, even if the cheque is later returned unpaid, the funds will not be debited to your account without your agreement (unless you are a knowing party to fraud).
This does mean that a cheque can still be taken from your account for up to six days after you pay it in even if you have already spent it.
For our purposes, a working day lasts from 9.00am to 5.00pm, Monday to Friday, excluding Bank Holidays. Cheques or cash paid in after 5.00pm (sometimes after 3.30pm) won’t be processed until the next working day.
If you have any further questions about the clearing cycle, please ask your relationship manager or your local branch.
More information on this initiative, and how it applies across the UK Banking Industry, is available at www.chequeandcredit.co.uk/246
The processing cycle for automated payments
Most automated payments are processed through the BACS system. Lloyds TSB follows the industry standard processing cycle of three working days as follows:
Day 1 | Payment details are sent overnight to BACS for processing. |
Day 2 | Payment details are sent to the receiving banks for processing in their systems. |
Day 3 | The value of the payments is credited to the beneficiaries’ accounts and the sending account is debited. This is known as same day debiting and crediting. |
The processing cycle for Internet and Telephone banking payments
Within Lloyds TSB the exceptions to the above processing cycle are payments made via Internet Banking, Telephone Banking and Standing Orders. These systems debit on day 1 and credit on day 3. However, as a Lloyds TSB customer, you will not lose the “value” of the money for these two days, as we adjust your interest calculation as though the money were in your account until day 3. This means that if your account was in credit and receiving interest, although the money would have been debited on day 1, we continue to pay interest until day 3.
For those customers who make payments by Internet or Telephone banking, Day 1 of the processing cycle starts the day after payment is requested. This is because these systems operate outside of normal working hours, and therefore the transactions are processed overnight.
