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Answer:
Dear
Denise,
The
new law means that checks will clear more quickly,
whether they are made out to BUYandHOLD.com, your
telephone company or the holder of your mortgage.
Here's the story.
The
Sinking Float
The
new law, effective October 28, puts serious limitations
around what's known in the banking industry as the
"float." The float is that one to five-day
window of opportunity between the day you write a
check and the day when your money is taken out of
your account to cover that check.
The
new law, called Check 21, allows banks to transmit
pictures, technically known as images, of your check
electronically. This dramatically speeds up the clearing
process and reduces or eliminates the float.
For
years, checks were moved about physically for processing.
That meant, of course it could easily take up to five
days to clear a check from an out-of-town bank.
Now,
with electronic transfers, your checks will clear
much, much faster.
Possible
Problems
Here
are two things to be aware of:
(1)
Bounced Checks. If you've been using the float
-- that is, writing checks not fully covered on the
day written, assuming you have a one to five-day time
frame to add additional money to your account, you
will wind up bouncing checks.
(2)
Paycheck Holds. Under the new law, banks will
still be allowed to put "local" holds on checks for
up to five business days. That means if you work for
a company that has its headquarters in another city
and if it has been putting holds on its employee's
paychecks, it can continue to do so. Should you write
checks during the hold period, and you don't have
sufficient funds in your account, those checks will
bounce.
What
You Can Do
-
Contact Your Employer. Ask your company payroll
or business department what the firm's policy is
on putting holds on employee's checks.
-
Set Up Direct Deposit. Arrange for your paycheck
to be deposited directly into your bank account.
This way, it will avoid being put on official hold.
-
Balance Your Checkbook. This has always been
good advice. Now it's become imperative advice.
I don't think you need to reconcile your account
to the penny. Rounding out to the nearest dollar
will still keep you on track.
$Tip: Don't forget to take into account any
ATM transactions, debit purchases, automatic payments
and mail deposits.
-
Look Into Bounced Check Protection. If you're
a haphazard type when it comes to things financial,
you may want to purchase bounce protection from
your bank. However, if it's expensive, do so only
as a last resort. First, find out how much it costs
($20 to $30 per transaction is common) and if it
covers overdraws made via ATMs and debit cards.
Caution: Some banks also slap on a $2+ fee
per day for days while you're still overdrawn.
Canceling
Out Canceled Checks
The
new law also allows banks and credit unions to destroy
your original checks after they have made digital
images. Some banks are already sending copies of these
copied digital images in their monthly statements;
more will begin to do so.
$Tip:
If you need to prove that you made a charitable contribution,
paid your taxes or took care of a car payment and
you don't have the original check or the digital image,
you will need to ask the bank to make a copy of your
check. These copies are now considered legitimate
proof of payment.
At
BUYandHOLD
Regarding
your account at BUYandHOLD or our parent company,
Freedom Investments, there are no changes internally;
however, our bank may transmit your check electronically
to speed up the clearing process.
If
you are writing a check to purchase securities or
to deposit money into your account, make certain that
you have enough money in your banking account before
sending us the check.
Feel
free to write in again if you have more questions
on the new Check 21 law.
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