Now we have computer systems that can instantly determine the funds available in an account when a transaction occurs. One bank can also contact another bank instantly when an individual wants cash from a bank that they are not a member of.
How did people manage to do this when there were mountains, oceans, and seas between one bank another?
In: Economics
When it came to checks, the short answer is the process was not instantaneous. You would deposit a check and would have to wait 3-5 business days for the check to “clear” – meaning that the issuing bank would transfer the funds to your bank, after which they would be available in your account. If the funds were not available, the check would bounce and you would not receive funds. International transactions – “mountains, oceans, and seas between one bank another” – were also much less common and would not typically be handled by personal check.
Credit was handled via the actual credit companies. When someone came to your store to make a charge, you would call the credit intermediaries (eg. Visa, Mastercard) and they would check to see if the customer had enough credit available to make the purchase. If they did, then you would be given an authorization code for the transaction, assuring that you would be provided funds.
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