The Long Shadow of Checks
bitsaboutmoney.com
The Long Shadow of Checks
1–10 of 112 posts
Re: The Long Shadow of Checks
#2> One control which we made for checks to reduce systemic risk continues to have consequences more than a century later. Most disagreements between you and a grocery store are beneath the notice of the law. If you and your grocery store have a disagreement about a check specifically, you can go to jail. The crime is sometimes called “uttering”, for charming historical reasons.
patio11: you write a lot, and have taught me a lot, and I appreciate it. But I want to make a small complaint. You frequently say things like "for charming historical reasons" and then _cite no sources_. Link something! Cite something! As a reader, I regularly feel like you are teasing me or showing off to me when you include all these small asides without any further reference or any concrete details.
Re: The Long Shadow of Checks
#3> One control which we made for checks to reduce systemic risk continues to have consequences more than a century later. Most disagreements between you and a grocery store are beneath the notice of the law. If you and your grocery store have a disagreement about a check specifically, you can go to jail. The crime is sometimes called “uttering”, for charming historical reasons. patio11: you write a lot, and have taugh…
It's actually kind of boring in this case, per Wikipedia: "In law, uttering is synonymous with publication, and the distinction made between the common law offences was that forgery was the fabrication of a forged instrument (with the intent to defraud) and uttering was the publication of that instrument (with the intent to defraud)."
Re: The Long Shadow of Checks
#4I'm continually surprised by the political influence held by the thousands of tiny banks in the country. I must applaud the people behind the Check 21 Act: it's the combination of a neat backwards compatibility trick (if you want paper, we'll print it and send it to you) and political maneuvering that I must admire it.
> Since the standard U.S. bank account is a checking account, even if it cannot write checks, it is necessarily a credit product.
Why is this the case? Checking accounts without the ability to overdraft and thus create credit risk exist; I've always wondered why they're not more widespread. Is it a problem that people who are Chex blacklisted are unprofitable anyways?
Re: The Long Shadow of Checks
#5> “Clearing” is a magic finance word. Clearing a check refers to completing the process which the check agrees to: the writer sees money leave their account and the person depositing the check sees it enter theirs. This is much more complicated than it sounds in this quick gloss.
Just because the writer of the check sees the funds of their check leave their account, this does not mean the recipient of the check has collected those funds. At any given moment, there is a considerable amount of money belonging either to check writers or recipients, not under their control yet being invested in overnight investments and repurchase agreements for the profit of the bank(s) involved. This becomes quite exaggerated when you think of the time zones involved and the fact that the resolution of the clearing houses is greater than or equal to 24 hours. So a check from an account in Puerto Rico to an account in Hawaii will take a minimum of 24 + 6 hours = 30 hours for the bank(s) to get a return on their customer funds. As the article points out, the "clearing" of funds to the recipient's account is an act of credit and not an act of money transfer.
Re: The Long Shadow of Checks
#6The compelling thing for me still with checks is that the banks take on nearly all the costs of processing them, and what costs are imposed on the customer are fixed, and do not scale with the amount of money being transferred. It's possible to do fixed-cost transfers using other systems (PayPal, Venmo, etc.) but it always feels like those transfers are only tolerated, and they really want to push you to their other offerings where they can get their vig.
Re: The Long Shadow of Checks
#7I'm continually surprised by the political influence held by the thousands of tiny banks in the country. I must applaud the people behind the Check 21 Act: it's the combination of a neat backwards compatibility trick (if you want paper, we'll print it and send it to you) and political maneuvering that I must admire it. > Since the standard U.S. bank account is a checking account, even if it cannot write checks, it is…
Even without the bank giving the check writer the privilege of overdrafting, either the bank or the check recipient has to absorb the loss if they accept a check for which the check writer has insufficient funds (unless the bank goes after the check writer). By contrast, with a debit card, the credit risk is much less (since the bank knows before the transaction whether sufficient funds are available).
Re: The Long Shadow of Checks
#8I'm continually surprised by the political influence held by the thousands of tiny banks in the country. I must applaud the people behind the Check 21 Act: it's the combination of a neat backwards compatibility trick (if you want paper, we'll print it and send it to you) and political maneuvering that I must admire it. > Since the standard U.S. bank account is a checking account, even if it cannot write checks, it is…
> political influence held by the thousands of tiny banks in the country
Car dealerships are pretty bad too.
Re: The Long Shadow of Checks
#9I'm continually surprised by the political influence held by the thousands of tiny banks in the country. I must applaud the people behind the Check 21 Act: it's the combination of a neat backwards compatibility trick (if you want paper, we'll print it and send it to you) and political maneuvering that I must admire it. > Since the standard U.S. bank account is a checking account, even if it cannot write checks, it is…
> I've always wondered why they're not more widespread
Historically, it's a major source of revenue for banks[1]. I used to use BOA, when I switched to a local credit union they at least offered me the choice of "overdraft protection," which obviously I declined.
Fortunately, overdraft fees appear to be growing less profitable[2], so hopefully banks will phase them out.
[1] https://www.consumerfinance.gov/about-us/newsroom/cfpb-resea...
[2] https://www.consumerfinance.gov/data-research/research-repor...
Re: The Long Shadow of Checks
#10> One control which we made for checks to reduce systemic risk continues to have consequences more than a century later. Most disagreements between you and a grocery store are beneath the notice of the law. If you and your grocery store have a disagreement about a check specifically, you can go to jail. The crime is sometimes called “uttering”, for charming historical reasons. patio11: you write a lot, and have taugh…
It's actually kind of boring in this case, per Wikipedia: "In law, uttering is synonymous with publication, and the distinction made between the common law offences was that forgery was the fabrication of a forged instrument (with the intent to defraud) and uttering was the publication of that instrument (with the intent to defraud)."
The distinction is a fact, but I haven't been able to find the _reason_ for the distinction, which I'm hoping is quite charming!