Wednesday, August 12, 2009

Banking Terms - Not as "Clear" as they should be

One thing that I found out after becoming a scam victim is that the terms that banks use are words that give the customers a false sense of security. Here are a few things about banking terms that you should know.

What “Clear” really means:
“The check has cleared” does not mean the money in your account belongs to you. It only means that the clearing house has not sent the draft back for non-sufficient funds, closed account, or flag instructions on the account. It does not mean the draft was written by the account holder.

Depending on the size or purpose of the account, the account holder may not notice the absence of funds for several days after the draft has reached his bank. In fact, an account holder may have up to one full year to report an unauthorized draft.

Bank statements are usually sent out on the 1st or 15th of the month. If the transaction took place near one of those dates, the account holder may be unaware of the unauthorized transaction until statements are sent out the following month and time is taken to balance the statement.

The problem . . . when a customer brings a cashier’s check or money order from someone that they do not know into the bank, and the bank tells them that it is “cleared” (some times after only 24 hours) it gives the customer a false sense of security that they can spend/use that money, but this is not the case. If a problem comes up with this document, the bank will come back to the customer and demand that they refund the entire amount.

What “Available funds” really means:
“Available funds” does not mean the money in your account belongs to you, even if a hold has been taken off the draft.

When you deposit a check into your bank account, your bank advances you the money for that check to keep the wheels of commerce moving. Of the millions and millions of checks processed every day, a relatively small number are returned because of a problem; because of this, banks and credit unions must automatically credit depositor accounts within a certain number of days.
A bank or credit union can make an exception to the rule and wait for a longer period of time on any given deposit before crediting the depositor account, but apart from such an exception the credit is automatic. Again, this wording gives the customer a false sense of security about the authenticity of the document in question.

This credit to your account is called a “provisional loan” and is actually a no-signature loan from your bank to you. It does not mean that your bank has been credited by the account holder bank. If your bank HAS extended you a “provisional loan” and you normally had a very low account balance, or had been the type of customer who would be denied a loan if you apply for one with your bank, you should know that their are some scam victims who have fought back against their banks using this as their case.

The only time the money in your account really belongs to you is when the check or money order has been HONORED, meaning your bank has been credited (paid) by the account holder bank.

ALWAYS ask your bank if the draft has been honored and DO NOT TOUCH THE MONEY until it has.

When in doubt about a draft, tell your bank to send the draft for COLLECTION.

Some banks are starting to use the terms “The check is pending” when the money has been deposited into the account, but the check has not yet been honored.

Sending a draft for Collection:
When you send a draft for Collection, it means that your bank or credit union will not put any money in your account until the draft has been paid, i.e. your bank has received the credit from the account holder bank.

Your bank or credit union will charge you a fee and give you an approximate time before the draft is honored. This time period may be as long as 6 to 8 weeks depending on the location of the account holder bank.

Some banks and credit unions will provide the collection service even if you do not have an account with them, so long as you pay the service charge.

Shawn Mosch
Co-Founder of
There is strength in numbers!

Find us on Twitter, Facebook and more through


  1. So how can I safely accept money from someone I cannot meet in person?

  2. The best way is to have THEM wire YOU the money.

    1. what if i did not get any check but the money had deposited into my account then asked me to the mystery shopper and report them the details of the western union or money gram?

  3. someone deposited a check from the same bank in my account. How long would it take for the draft to be honored.?
    the check has cleared and i already used the funds.

  4. On average, it takes 7 - 10 business days, but we have seen some checks come back 6 months later as counterfeit . . . and the bank customer is still held liable.

  5. So, if money orders have been cashed and it's been 7 days and the bank says they cleared does that mean everything is ok?

  6. No . . . we have seen checks come back as counterfeit up to 6 months later. "Cleared" only means "there is no problem yet".

  7. Said you are unsure of a money order, is there a safe way to cash it? Who does it fall back on ie. Sender/payee if you just cash it at a check cashing place??

    1. First you need to verify the money order. Call the place that issued the money order. DO NOT call any number listed on the actual money order . . . it could be a fake number . . . instead, look up the phone number on the internet.

      If the money order is fraudulent, liability falls back on the person who the check was written out to . . . in other words YOU!

  8. Why would I not be able to take the check to
    Suntrust Bank and cash the check there? If I can cash it in at Suntrust (the issuing bank), how would they be able to get the money back from me?