Eli5: why does it still take 2 business days for a check to clear when other transactions are instant?
In: 146
Because other transactions take a couple of days, too. What banks do is go ahead and deduct a charge to your debit card from your available balance, but the charge itself is still in a “pending” state until everything is confirmed. Point Of Sale transactions aren’t fully submitted until the end of the business day, and usually aren’t processed until the next business day by the bank, itself. Then the actual confirmation of funds transfer has to take place, which is usually the *next* business day.
Banks try to make this as seamless to the user as possible, trusting certain Point Of Sale providers in order to keep your account as accurate to the moment as possible. Checks, though, work a bit differently in that they aren’t fully electronic; they’re paper and can be faked. The bank has to verify that the check is a real, authorized transaction because writing a check doesn’t carry the same cryptographic security procedures as a Point Of Sale transaction.
“But what about check scanning apps,” you ask? “I scan my check and have the money available immediately!” Well, that’s your bank giving you the benefit of the doubt and advancing you the amount of the check. They assume you know the source of the check and wouldn’t be trying to jerk them around, so they give you the money for it up front (up to a certain amount) while they handle the back end. If it turns out the check isn’t real or is bad, they’ll just yank the funds right back out of your account, anyway.
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