Banks are a place for us to handle our checking, savings, and possibly a loan. Beyond that, for many of us banking is a black hole. Why banks do what they do and how they do it is little understood outside of the banking community.

The more information you have, the better consumer you can be.

Part 10: Checking Terminology and 7 Important Rules 

This article will discuss important terminology and certain checking account rules the bank follows.

Available Balance

Available balance is the most current record of the amount of money available for your use or withdrawal. When you call the bank for your balance, they will give you the most current available balance. How the bank calculates the available balance:

Previous day ending balance

• Less any holds placed on deposits

• Less pending withdrawals the bank has authorized

• Plus, pending deposits that are immediately available, such as cash and checks that were not put on hold.

Checking Account Rules

Here are some important checking account rules:

1. Non-customers presenting checks over the counter must have an acceptable ID. Acceptable ID is any government photo ID, such as a driver’s license, military ID, or passport. What all acceptable IDs have in common is a birth date, photo, and issue date.

2. If you want to withdraw large amounts of cash, you must notify the bank in advance so that they have the funds available. Large amounts are usually $20,000 or more. If you want certain denominations of cash, you must notify the bank in advance for the same reason you would if the amount was much smaller. You must provide your own security when leaving the bank with large amounts of cash. Simply put, if you walk around with cash, be careful.

3. If you require multiple signers on a check, the bank will not check to see if your checks have those signatures. This is due to the large amounts of checks—in the thousands or even more—that are processed each day by the banks. The software and machines that process these checks cannot be tailored for individual account requirements due to the very high cost of doing so.

4. If your check has special instructions such as “void after 30 days,” the bank will not verify that the check is within the instruction guidelines, regardless of the special instructions. The bank does not follow special instructions written on a check (this is for the same reason as noted in number 3).

5. If you use a check-signing stamp or machine, the bank will accept these types of signatures, however, you must use standard checking size, paper, dimensions for your checks. The bank will not accept any checks written on paper or material not following these dimensions.

There are generally two sizes of checks. "Business" checks are the same size as pre-1929 US currency. "Personal" checks are the same size as modern US currency. These are not coincidences; making checks the same size as money means that all of the cash register trays etc, built to hold money can also hold checks and the software and hardware that process checks are tailored for the same dimensions.

6. The bank posts transactions to your account in a specific way. Transactions are posted each business day (M to F), except Federal Holidays. Posting can be done multiple times a day, and there are several key steps to the process.

First, the bank calculates the available balance. Then, all transactions are sorted into categories. Deposits made are added to the balance; withdrawals and payments are subtracted. Checks are processed based on the date and time they are received by the bank. Finally, any checks which you have authorized are paid.

7. Stop payments on a check are good for a period of 6 months only. They can be renewed for another 6 months if needed. If you do not renew a stop payment your check can be cashed.

The only way to ensure that a check is not cashed in the future is to constantly renew the stop payment. Other than this constant stop payment renewal, there is no way to permanently stop a check from being cashed, with the exception of a cashiers check. The bank can, and does, put on permanent hold on cashier’s checks because this type of check comes from the bank’s own checking account, and so it has control over the account and its contents.

Stay tuned to read about getting an account started as the first financial health mini-series from Common “Cents” concludes, next month.

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