The business of check cashing(bitsaboutmoney.com)
bitsaboutmoney.com
The business of check cashing
https://www.bitsaboutmoney.com/archive/the-business-of-check-cashing/
335 comments
The article it’s well built and the author is knowledgeable about the business side of check cashing, but as soon as I saw the title graphic, I thought “oh boy, here we go.” I assume the author had the best intentions and I acknowledge the somewhat tongue-in-cheek style, but the soigné tone and the assumption that the topic is alien to and deeply beneath anyone reading the article is obnoxious. Check cashing places were an important part of my scrappier younger-adult years— cultural rifts like this have always kept me from being truly socially comfortable among a big chunk of the tech crowd no matter how much noise they make about inclusivity.
From the article:
> One of the reasons I covered the checks as a payment method recently was to lay the groundwork for talking about some of the fascinating alternative financial world around them. In the main, this helps people at the socioeconomic margins turn payroll and other checks into cash (or otherwise immediately spendable value) in return for a fee. This is not how you, reader, probably deal with checks, and the existence of this industry / product have been controversial for many years.
So what's funny is that the topic is actually totally alien to me. But that's because I have only ever dealt with one or two checks in my life (when interacting with an American company paying interview expenses). And otherwise, I've never handled them at all. They just have been out-of-use in my parts of the world (Europe, Singapore, Australia) for at least as long as I've been economically active in them. From what I've heard, the US is going in that direction as well? So many younger people would have never handled checks there either?
But the paragraph just assumes that you would be familiar with checks in general, but not with check cashing. (Later on in the article, our author explains the basics of how well-enough-off people handle checks. So that's fine.)
Edit: reading further down, I'm ok with the tone of the article and don't share the concerns.
> One of the reasons I covered the checks as a payment method recently was to lay the groundwork for talking about some of the fascinating alternative financial world around them. In the main, this helps people at the socioeconomic margins turn payroll and other checks into cash (or otherwise immediately spendable value) in return for a fee. This is not how you, reader, probably deal with checks, and the existence of this industry / product have been controversial for many years.
So what's funny is that the topic is actually totally alien to me. But that's because I have only ever dealt with one or two checks in my life (when interacting with an American company paying interview expenses). And otherwise, I've never handled them at all. They just have been out-of-use in my parts of the world (Europe, Singapore, Australia) for at least as long as I've been economically active in them. From what I've heard, the US is going in that direction as well? So many younger people would have never handled checks there either?
But the paragraph just assumes that you would be familiar with checks in general, but not with check cashing. (Later on in the article, our author explains the basics of how well-enough-off people handle checks. So that's fine.)
Edit: reading further down, I'm ok with the tone of the article and don't share the concerns.
>If you are reading this, you probably are relatively wealthy, are almost certainly of high socioeconomic status, and quite plausibly have never paid one red cent for check cashing in your entire life.
I was speaking from personal experience within a cultural context, so your perspective doesn't apply. Whether or not you've relied on paper paychecks in the US has far more to do with socioeconomic status than age.
I was speaking from personal experience within a cultural context, so your perspective doesn't apply. Whether or not you've relied on paper paychecks in the US has far more to do with socioeconomic status than age.
Age matters here. 30 years ago, paper paychecks were still commonly used to pay US workers at all socioeconomic levels, especially at smaller employers.
30 years ago? They were common enough 15 years ago in white collar jobs. But low-wage workers that often have less stable employment often still get paper checks. And like payday loans and monthly rates at cheap motels, check cashing is an expensive product used primarily by people without much income: real personal loans and leases require credit, and you can't deposit a $300 paycheck at a bank where you're $120 in the hole for overdraft fees and you're $400 short on your share of the rent. People in the middle-class and up generally use banks, even if they need to cash a check. Unless the check originated at the bank you're in, they only give you a certain amount upfront and make you take the rest from your checking account until it clears. That's only an option if you have enough in your account to cover the difference.
Well, my socioeconomic status is that I am not from the US.
If you want to check my 'poor people credentials': I grew up on welfare in (mostly former) East Germany. Nowadays I live comfortably as a programmer.
Poor people don't use checks in Germany. Some rich people might (still) use them for idiosyncratic reasons.
If you want to check my 'poor people credentials': I grew up on welfare in (mostly former) East Germany. Nowadays I live comfortably as a programmer.
Poor people don't use checks in Germany. Some rich people might (still) use them for idiosyncratic reasons.
Check usage is definitely on a downwards trend here in the US too, but there are very important benefits to using them and I doubt they will ever become truly obsolete.
As for the benefits I just alluded to, they are in no particular order:
* Simplicity and security. You cut someone a check, it's effectively the same as handing someone a wad of cash but without the logistical, security, and social issues associated with handling wads of cash.
* Convenience. Checks are easy to use and require nothing other than a pen compared to other forms of transferring money, such as wire transfers or debit cards.
* Assurance. Cashier's checks are a special kind of check guaranteed by the underwriting bank. These are often used when large sums of money need to exchange hands with no hassle or problems (eg: real estate or vehicle purchases).
As for the benefits I just alluded to, they are in no particular order:
* Simplicity and security. You cut someone a check, it's effectively the same as handing someone a wad of cash but without the logistical, security, and social issues associated with handling wads of cash.
* Convenience. Checks are easy to use and require nothing other than a pen compared to other forms of transferring money, such as wire transfers or debit cards.
* Assurance. Cashier's checks are a special kind of check guaranteed by the underwriting bank. These are often used when large sums of money need to exchange hands with no hassle or problems (eg: real estate or vehicle purchases).
>[...] and security.
Disagree about the security. I just found out last month how unsecure the use of paper checks actually are because they expose your bank account & routing number.
I had an old checking account that was dormant and I hadn't written any paper checks against it for 10 years. What then happened was a landscape service asked me for payment for some work so I had my credit-card ready to settle the bill but they surprised me by saying they would charge extra 3% fee for processing the card. However, they said there was no fee if I paid by paper check. I didn't want to pay hundreds extra in fees so I used that dormant checking account to pay them with a paper check. They cashed my check the next day and I didn't think anything about it.
About a month later, I saw a mysterious "e-check" that subtracted money from my dormant checking account! It was not ACH; it was a generated e-check from a billing service popular with adult companies. So somebody from the landscaping company used the numbers on the bottom of my paper check to generate a fake digital check. The thief was on a website that let you pay for a subscription by creating an echeck; the web form would have fields for entering anybody's bank routing # and account #. (Example: https://solutionscout.com/payment-processing/e-check/)
When I talked to Bank of America about the fraud, I asked the customer service representative if there was any security setting that would prevent fake checks like that from deducting money from the account. He said "no". The fake e-check even had a totally bogus check # that was out of sequence with my real checks and he said their system doesn't verify the sequential #s. Literally, you're powerless to stop it and the only thing you can do is let the fake e-checks steal your money -- and then later file a fraud claim hoping to get the money back!
Paper checks are flawed with a critical security hole by letting companies generate fake e-checks. This means the more paper checks you write and release out into the world, the more of your banking surface area is exposed for you to become a victim of fraud.
Disagree about the security. I just found out last month how unsecure the use of paper checks actually are because they expose your bank account & routing number.
I had an old checking account that was dormant and I hadn't written any paper checks against it for 10 years. What then happened was a landscape service asked me for payment for some work so I had my credit-card ready to settle the bill but they surprised me by saying they would charge extra 3% fee for processing the card. However, they said there was no fee if I paid by paper check. I didn't want to pay hundreds extra in fees so I used that dormant checking account to pay them with a paper check. They cashed my check the next day and I didn't think anything about it.
About a month later, I saw a mysterious "e-check" that subtracted money from my dormant checking account! It was not ACH; it was a generated e-check from a billing service popular with adult companies. So somebody from the landscaping company used the numbers on the bottom of my paper check to generate a fake digital check. The thief was on a website that let you pay for a subscription by creating an echeck; the web form would have fields for entering anybody's bank routing # and account #. (Example: https://solutionscout.com/payment-processing/e-check/)
When I talked to Bank of America about the fraud, I asked the customer service representative if there was any security setting that would prevent fake checks like that from deducting money from the account. He said "no". The fake e-check even had a totally bogus check # that was out of sequence with my real checks and he said their system doesn't verify the sequential #s. Literally, you're powerless to stop it and the only thing you can do is let the fake e-checks steal your money -- and then later file a fraud claim hoping to get the money back!
Paper checks are flawed with a critical security hole by letting companies generate fake e-checks. This means the more paper checks you write and release out into the world, the more of your banking surface area is exposed for you to become a victim of fraud.
For business accounts, "positive pay" and "reverse positive pay" are solutions to check fraud. With "positive pay", you upload the check number, the payee name, and the amount to your bank, if any of them don't match, such a check is rejected. With "reverse positive pay", your bank delegates the responsibility of approving any check to you.
Paper checks are useful, if you have various accounts with different banks. You can write a check for yourself to move money around.
Even mailing personal checks is not secure, as they are stolen. Even postal employees are involved in this [1].
[1] https://www.nbcnews.com/news/postal-worker-3-charged-24-mill...
Paper checks are useful, if you have various accounts with different banks. You can write a check for yourself to move money around.
Even mailing personal checks is not secure, as they are stolen. Even postal employees are involved in this [1].
[1] https://www.nbcnews.com/news/postal-worker-3-charged-24-mill...
>their system doesn't verify the sequential #s
Not sure what good that would do. I keep a few checks in a travel folder and have a couple pads of checks in different places around my house. I don't necessarily write checks in sequential order.
Yes, they're not very secure. It's also a system that generally works pretty well for a lot of people. And, yes, it's a good idea not to keep an excessively large bank balance for a variety of reasons.
Not sure what good that would do. I keep a few checks in a travel folder and have a couple pads of checks in different places around my house. I don't necessarily write checks in sequential order.
Yes, they're not very secure. It's also a system that generally works pretty well for a lot of people. And, yes, it's a good idea not to keep an excessively large bank balance for a variety of reasons.
>Not sure what good that would do. I keep a few checks in a travel folder and have a couple pads of checks in different places around my house. I don't necessarily write checks in sequential order.
Yes, I understand that scenario where the checks are not written in exact sequential order by the account holder -- nor are they presented to the bank for clearing in exact sequential order by people trying to cash them.
However, when the last real check I wrote is sequence #3374 and the fake e-check hitting my account is sequence #1687557289469, that's an arithmetic difference of 168 billion checks!
We're not talking about a fudge factor difference of +/- 50 in check numbering because real people write paper checks out of sequence. We're talking about basic sanity checking for fraud. E.g. Do bank account holders typically write billions of checks such that the simple subtraction of 2 different check sequence numbers is billions apart?
Here's the crazy part... The Bank of America website UI for online banking already visually warns you when it detects a out-of-sequence check # gap! It just doesn't use that existing logic to stop payment on an obviously counterfeit echeck.
Yes, I understand that scenario where the checks are not written in exact sequential order by the account holder -- nor are they presented to the bank for clearing in exact sequential order by people trying to cash them.
However, when the last real check I wrote is sequence #3374 and the fake e-check hitting my account is sequence #1687557289469, that's an arithmetic difference of 168 billion checks!
We're not talking about a fudge factor difference of +/- 50 in check numbering because real people write paper checks out of sequence. We're talking about basic sanity checking for fraud. E.g. Do bank account holders typically write billions of checks such that the simple subtraction of 2 different check sequence numbers is billions apart?
Here's the crazy part... The Bank of America website UI for online banking already visually warns you when it detects a out-of-sequence check # gap! It just doesn't use that existing logic to stop payment on an obviously counterfeit echeck.
The system you're envisioning whereby banks refuse payment on otherwise valid checks based on Reasons seems a lot crazier.
So a valid check is presented to my bank with sequence number N and cashed. Another valid check is presented with sequence number N+10000 and refused. So now I've got to pay a fee to the second vendor for the returned check, they probably won't accept a check from me now so I've got to pay with a credit card and there's a decent chance I'm paying 3% more for that pleasure. So the bank trying to be helpful just cost me $25-50+3% and has done nothing to prevent actual fraud from occurring - I would not be using that bank for very long!
The guy at that landscaping company already committed a bunch of felonies, it's computer fraud, bank fraud, probably one or two others. Not sure what the bank wasting its efforts trying to combat this would accomplish.
So a valid check is presented to my bank with sequence number N and cashed. Another valid check is presented with sequence number N+10000 and refused. So now I've got to pay a fee to the second vendor for the returned check, they probably won't accept a check from me now so I've got to pay with a credit card and there's a decent chance I'm paying 3% more for that pleasure. So the bank trying to be helpful just cost me $25-50+3% and has done nothing to prevent actual fraud from occurring - I would not be using that bank for very long!
The guy at that landscaping company already committed a bunch of felonies, it's computer fraud, bank fraud, probably one or two others. Not sure what the bank wasting its efforts trying to combat this would accomplish.
>Not sure what the bank wasting its efforts trying to combat this would accomplish.
It would prevent me from losing my money! I filed a fraud claim form that also required an affidavit with notarized signature and Bank of America still won't return the stolen money. That money is gone.
>The system you're envisioning whereby banks refuse payment on otherwise valid checks based on Reasons seems a lot crazier.
My point is that BofA computer systems already have some aspects of "suspicious activity" algorithms and heuristics in place to prevent counterfeit checks stealing funds from the account. The banks are already "wasting effort" as you put it to try and distinguish real vs fake checks. E.g. When the landscaper tried to cash my legitimate check that had my handwriting and my signature, the bank sent me a phone alert which I then had to explicitly approve. Otherwise, they would reject the check. (An example of "Reasons" as you put it.) This is what the verification alert that requires explicit approval looks like: https://imgur.com/a/62dCsBx
But the next check a month later that someone faked, with a weird sequence #, without any signature, and the "payee" to a company notoriously known for unauthorized checking account withdrawals and fraud... No alert for my approval was sent; instead, they just went ahead and paid it.
If the banking system allows 3rd parties to fabricate e-checks with no verification, they should also offset that dangerous power by allowing account holders the security tools to stop those types of echecks from being cashed. E.g. a smartphone approval step.
It would prevent me from losing my money! I filed a fraud claim form that also required an affidavit with notarized signature and Bank of America still won't return the stolen money. That money is gone.
>The system you're envisioning whereby banks refuse payment on otherwise valid checks based on Reasons seems a lot crazier.
My point is that BofA computer systems already have some aspects of "suspicious activity" algorithms and heuristics in place to prevent counterfeit checks stealing funds from the account. The banks are already "wasting effort" as you put it to try and distinguish real vs fake checks. E.g. When the landscaper tried to cash my legitimate check that had my handwriting and my signature, the bank sent me a phone alert which I then had to explicitly approve. Otherwise, they would reject the check. (An example of "Reasons" as you put it.) This is what the verification alert that requires explicit approval looks like: https://imgur.com/a/62dCsBx
But the next check a month later that someone faked, with a weird sequence #, without any signature, and the "payee" to a company notoriously known for unauthorized checking account withdrawals and fraud... No alert for my approval was sent; instead, they just went ahead and paid it.
If the banking system allows 3rd parties to fabricate e-checks with no verification, they should also offset that dangerous power by allowing account holders the security tools to stop those types of echecks from being cashed. E.g. a smartphone approval step.
> It would prevent me from losing my money! I filed a fraud claim form that also required an affidavit with notarized signature and Bank of America still won't return the stolen money. That money is gone.
As someone who was previously a customer of Bank of America and suffered my own form of theft and fraud (I was pickpocketed and someone used my debit card illicitly afterwards before I could cancel it). I can tell you with an absolute certainty that your experience is very specific to Bank of America or large national banks generally and not any sort of rule or law.
Do yourself a big favor and close your accounts with BoA and join a local/regional credit union. Nearly a decade after my first incident, I had another issue and the experience and how I was treated by my credit union vs how BoA treated me were worlds apart.
Either one will require an affidavit, the credit union offers members a free notary service at any branch so I simply filled it in person at a branch. The affidavit is to protect the bank by ensuring you are liable for false statements. The credit union also helped me pressure the police to actually do something, which resulted in three arrests of a group of teenagers that had more than 800 stolen cards in their possession when arrested. And I had the stolen funds returned to my account the same day at the branch, good as cash.
In that interim decade I stopped carrying a debit card and only used credit cards because of how badly my experience with BoA was. I now know that it’s not the card you use, it’s the /bank/ you use that makes the difference.
As someone who was previously a customer of Bank of America and suffered my own form of theft and fraud (I was pickpocketed and someone used my debit card illicitly afterwards before I could cancel it). I can tell you with an absolute certainty that your experience is very specific to Bank of America or large national banks generally and not any sort of rule or law.
Do yourself a big favor and close your accounts with BoA and join a local/regional credit union. Nearly a decade after my first incident, I had another issue and the experience and how I was treated by my credit union vs how BoA treated me were worlds apart.
Either one will require an affidavit, the credit union offers members a free notary service at any branch so I simply filled it in person at a branch. The affidavit is to protect the bank by ensuring you are liable for false statements. The credit union also helped me pressure the police to actually do something, which resulted in three arrests of a group of teenagers that had more than 800 stolen cards in their possession when arrested. And I had the stolen funds returned to my account the same day at the branch, good as cash.
In that interim decade I stopped carrying a debit card and only used credit cards because of how badly my experience with BoA was. I now know that it’s not the card you use, it’s the /bank/ you use that makes the difference.
It is likely because the bank doesn’t know what checkbooks you own and use, and has no way to know it. You could have ordered more third-party checks (legal, not fabricated), and if you do, commonly you would use a different sequence starting point for those, so that you can distinguish which checkbook you used. More commonly the case for businesses but you can buy them from Intuit for example: https://intuitmarket.intuit.com/checks
> We're talking about basic sanity checking for fraud. E.g. Do bank account holders typically write billions of checks such that the simple subtraction of 2 different check sequence numbers is billions apart?
When I last used checks (about 30 years ago?), my sequence numbers would vary by that much because I used them to encode metadata about the check. Only the last 3 digits were actually a sequence number.
When I last used checks (about 30 years ago?), my sequence numbers would vary by that much because I used them to encode metadata about the check. Only the last 3 digits were actually a sequence number.
Checks also let you do fairly complex multiparty commerce without needing to spend millions of dollars engineering it, like an apartment broker requiring you to give them a check for deposit/first month’s rent and signed lease prior to releasing the keys to you. Note that the check is to the landlord and the broker cannot access her accounts, but visual inspection of a check plus the previous underwriting lets this work without needing to loop landlord in again (in real time) to release keys.
> Checks also let you do fairly complex multiparty commerce without needing to spend millions of dollars engineering it, like an apartment broker requiring you to give them a check for deposit/first month’s rent and signed lease prior to releasing the keys to you.
You don’t need to spend millions of dollars engineering an electronic solution to this problem, you just need a legal agreement between the broker and the landlord allowing the broker to accept the deposit on the landlord’s behalf. That’s not exactly a stretch.
I don’t even know my current landlord’s name, to be honest. It’s on the lease, but my deposit and rent go to the management company that maintains the building.
You don’t need to spend millions of dollars engineering an electronic solution to this problem, you just need a legal agreement between the broker and the landlord allowing the broker to accept the deposit on the landlord’s behalf. That’s not exactly a stretch.
I don’t even know my current landlord’s name, to be honest. It’s on the lease, but my deposit and rent go to the management company that maintains the building.
The broker and landlord have no idea if the money exists just because they get a paper check. Seems like a far worse guarantee than simply transferring the money electronically and the landlord having instant assurance they received it.
If the recipient of a check wants assurance that there is actual money behind the check, they should demand a cashier's check for reasons I already iterated.
Which is more likely:
Receiving a fake cashier’s check, or the opposing party hacking into your bank and showing a transaction that will disappear?
Regardless of how unlikely the fake cashier’s check is, a fraudulent electrinic money transfer is still more unlikely. And the electronic transfer is cheaper (free). And less work for everyone.
Receiving a fake cashier’s check, or the opposing party hacking into your bank and showing a transaction that will disappear?
Regardless of how unlikely the fake cashier’s check is, a fraudulent electrinic money transfer is still more unlikely. And the electronic transfer is cheaper (free). And less work for everyone.
I think you may be misinformed about "electronic money transfer" at least in the United States.
As far as I know the only way to execute an immediately-settled electronic transfer is a wire transfer, which is inaccessible to lots of people and has an associated fee for nearly everyone else.
As far as I know the only way to execute an immediately-settled electronic transfer is a wire transfer, which is inaccessible to lots of people and has an associated fee for nearly everyone else.
I used to pay a landlord with Zelle 10+ years ago.
And Zelle obviously has a lot of limitations, such as being for smaller amounts of money so not useful for down payments or such, I was referring to checks versus electronic payments as a concept in general, not the US’s specific implementation. Which there isn’t one, but due to political failure, not technical limitations seeing as how every other country has the capabilities.
And Zelle obviously has a lot of limitations, such as being for smaller amounts of money so not useful for down payments or such, I was referring to checks versus electronic payments as a concept in general, not the US’s specific implementation. Which there isn’t one, but due to political failure, not technical limitations seeing as how every other country has the capabilities.
I was under the impression that immediately-settled electronic transfers were Zelle’s raison d'être. I understand that it’s not universally available, but still.
You're not using "immediately settled" in the same way as the parent.
Zelle transactions are subject to reversion or cancellation ... for days?
Compare to, say, settlement cycles in SWIFT: https://www.swift.com/news-events/news/preparing-t1-global-i...
Zelle transactions are subject to reversion or cancellation ... for days?
Compare to, say, settlement cycles in SWIFT: https://www.swift.com/news-events/news/preparing-t1-global-i...
I'm using "settled" in the colloquial "the money has been debited from the sender's account and has been credited to the receiver's account" sense, which for the purposes of this discussion is the definition that really matters.
You can't just unilaterally reverse a Zelle payment any more than you can a SEPA transfer.
You can't just unilaterally reverse a Zelle payment any more than you can a SEPA transfer.
My understanding is that Zelle transfers are just settled by ACH under the hood, which is the same system that settles checks.
However there is possibly some new "real-time payment" feature of the ACH network that could be equivalent to wire settlement, but I'm not sure Zelle actually uses it.
However there is possibly some new "real-time payment" feature of the ACH network that could be equivalent to wire settlement, but I'm not sure Zelle actually uses it.
As far as I know Zelle prefers RTP[1] for settlements and falls back to ACH only when necessary, but I'm sure there's a Zelle employee on here who can confirm one way or the other.
There's also FedNow[2] but I don't know of any retail implementations yet.
1. https://www.theclearinghouse.org/payment-systems/rtp
2. https://www.frbservices.org/financial-services/fednow
There's also FedNow[2] but I don't know of any retail implementations yet.
1. https://www.theclearinghouse.org/payment-systems/rtp
2. https://www.frbservices.org/financial-services/fednow
Less work for everyone if there is infrastructure for this transfer to occur, which doesn't exist in the US. So kind of a moot point.
There is, Zelle. And I was under the impression the conversation was not specific to the US, but rather about checks as method of payment in general.
Security: not so much, you’re handing the recipient your “user and password” to your account printed right there on the check.
Convenience: will be superseded by FedNow. Is already superseded by various apps.
Assurance: cashiers checks aren’t really relevant to this discussion. They’re not the same as a check, they might as well be a different product entirely, and they generally cost money to use for everyone except those who have fancy high value bank accounts.
Convenience: will be superseded by FedNow. Is already superseded by various apps.
Assurance: cashiers checks aren’t really relevant to this discussion. They’re not the same as a check, they might as well be a different product entirely, and they generally cost money to use for everyone except those who have fancy high value bank accounts.
> and I doubt they will ever become truly obsolete.
I expect they will just become obsolete slower in the USA than other parts of the world.
Personal cheques are already obsolete in my country (New Zealand). And their usage looks to be sharply declining in European countries: https://www.statista.com/statistics/443677/cashless-payment-... or countries are trying to stop their usage (UK, Australia).
https://www.statista.com/statistics/1055578/check-usage-by-c... implies that the USA likes checks. 30 years ago NZ had over 50% of transactions by cheque.
Yes, checks have important benefits but the downsides (fraud, processing costs, credit risk) lead to them becoming uncommon and then obsolete in other countries. No reason the USA will be different.
I expect they will just become obsolete slower in the USA than other parts of the world.
Personal cheques are already obsolete in my country (New Zealand). And their usage looks to be sharply declining in European countries: https://www.statista.com/statistics/443677/cashless-payment-... or countries are trying to stop their usage (UK, Australia).
https://www.statista.com/statistics/1055578/check-usage-by-c... implies that the USA likes checks. 30 years ago NZ had over 50% of transactions by cheque.
Yes, checks have important benefits but the downsides (fraud, processing costs, credit risk) lead to them becoming uncommon and then obsolete in other countries. No reason the USA will be different.
> Cashier's checks
Though I was surprised a couple years ago when I bought a new car. I thought I'd have to run to a bank branch to get a cashier's check to pay the balance (as I've had to do in the past). They were fine with just a personal check. I assume the finance guy had some means to verify I had the balance in my account.
Though I was surprised a couple years ago when I bought a new car. I thought I'd have to run to a bank branch to get a cashier's check to pay the balance (as I've had to do in the past). They were fine with just a personal check. I assume the finance guy had some means to verify I had the balance in my account.
> I assume the finance guy had some means to verify I had the balance in my account.
I don't assume that.
Every dealership has their own policies. My guess is nonpayment on personal checks for car purchases is such a low occurrence that they are willing to take the risk of just assuming that the check will clear. Plus they also (in my state anyway) register and title the car on behalf of the DMV so they have all your information.
When I bought my car I said I needed to move the money into my checking account before I wrote a check. It was from the same bank so it was instant but they replied "no problem - do you need us to hold the check for a couple days then?"
I don't assume that.
Every dealership has their own policies. My guess is nonpayment on personal checks for car purchases is such a low occurrence that they are willing to take the risk of just assuming that the check will clear. Plus they also (in my state anyway) register and title the car on behalf of the DMV so they have all your information.
When I bought my car I said I needed to move the money into my checking account before I wrote a check. It was from the same bank so it was instant but they replied "no problem - do you need us to hold the check for a couple days then?"
When I came to the US ten years ago I hadn’t written a check in a decade. I was absolutely shocked that I could buy a car and later put down a deposit on a house with a personal check.
The amount of trust people are willing to place on a piece of unauthenticated paper is astonishing.
The amount of trust people are willing to place on a piece of unauthenticated paper is astonishing.
In the US, anyone can sue anyone for anything. If the check comes with a legal agreement, especially notarized, being made whole is easy. Worst case, they take the collateral (house, car) back and get to sell it again. And then there's the fines and jail time if the local prosecutor takes an interest. It's all downside for the aspiring thief.
There are kinds of check fraud people get away with it, but none of them involve legal names and an address to send a summons to.
There are kinds of check fraud people get away with it, but none of them involve legal names and an address to send a summons to.
Being able to sue has no relation to being able to collect any judgments for damages.
Even the US government requires cashier’s checks, not personal checks, for passports.
>Worst case, they take the collateral (house, car) back and get to sell it again.
Worst case is the asset gets trashed or stolen and not recovered, and the seller spends a ton of time and money in court to find out the buyer has no assets to recover from.
Edit: I was wrong about the US passport needing a cashier’s check. It was probably for a travel visa, so a different country requiring it.
Even the US government requires cashier’s checks, not personal checks, for passports.
>Worst case, they take the collateral (house, car) back and get to sell it again.
Worst case is the asset gets trashed or stolen and not recovered, and the seller spends a ton of time and money in court to find out the buyer has no assets to recover from.
Edit: I was wrong about the US passport needing a cashier’s check. It was probably for a travel visa, so a different country requiring it.
>Even the US government requires cashier’s checks, not personal checks, for passports.
This must be a new policy - I wrote out a personal check for my passport.
This must be a new policy - I wrote out a personal check for my passport.
The benefits of your first two points are even greater with electronic mechanisms of transferring money.
And a big downside of checks is that it reveals your bank account and routing # in an ACH system where money can be “pulled” anytime from your account. Compare to an electronic money transfer system where money is pushed from entity to entity using a unique identifier, but can’t be “pulled”.
And a big downside of checks is that it reveals your bank account and routing # in an ACH system where money can be “pulled” anytime from your account. Compare to an electronic money transfer system where money is pushed from entity to entity using a unique identifier, but can’t be “pulled”.
What, in your opinion, is the sensitive and inclusive way to discuss a category of business that the author can fairly assume a significant fraction of the userbase has never interacted with? Should the author discard that assumption and presume every reader is deeply familiar with check cashing instead? We know, with reasonable statistical evidence from the FDIC, that this alternative assumption is untrue.
I ask because there is, as far as I can tell, no obvious way to do it. You could just as easily write an essay talking about carrier-provided phone financing, and it would expose a similar cultural rift where most Americans don't do that and are only very vaguely familiar with how it works.
Or is the glaring thing that you dislike here the clearly stated assumption that most of the readership is not like you? In which case perhaps we should simply request that authors not state such assumptions while they make them anyway in the interests of being maximally informative.
I ask because there is, as far as I can tell, no obvious way to do it. You could just as easily write an essay talking about carrier-provided phone financing, and it would expose a similar cultural rift where most Americans don't do that and are only very vaguely familiar with how it works.
Or is the glaring thing that you dislike here the clearly stated assumption that most of the readership is not like you? In which case perhaps we should simply request that authors not state such assumptions while they make them anyway in the interests of being maximally informative.
I did a google search for articles about temp laborers because I thought it would be a good analog, and this came up:
https://www.propublica.org/article/the-expendables-how-the-t...
Do you think this article is ineffective?
https://www.propublica.org/article/the-expendables-how-the-t...
Do you think this article is ineffective?
Yes, I do think it's ineffective. It's needlessly ponderous, excessively emotive, and cares far more about its activist mission than questions like "How is the business structured?". It's not an accident that the central character is someone carefully chosen to be maximally sympathetic to a well-meaning, well-off, educated liberal white person.
Moreover, a similarly sympathetic (and horrified progressive middle-class-assuming) portrait of a check cashing business and its customers would almost certainly read as incredibly condescending to someone who finds them a fact of life. The article quite clearly assumes its readers have never been temps, never been crammed into a van to work in a warehouse, and will be upset to learn the conditions in question. It just doesn't say so briefly, opting instead to bury the assumption.
Do you want to read an article that portrays your younger self as a victim so that readers can feel bad and maybe learn about the financial structure of check cashing? At the risk of making a large assumption, that does not seem like it would help you feel included.
Moreover, a similarly sympathetic (and horrified progressive middle-class-assuming) portrait of a check cashing business and its customers would almost certainly read as incredibly condescending to someone who finds them a fact of life. The article quite clearly assumes its readers have never been temps, never been crammed into a van to work in a warehouse, and will be upset to learn the conditions in question. It just doesn't say so briefly, opting instead to bury the assumption.
Do you want to read an article that portrays your younger self as a victim so that readers can feel bad and maybe learn about the financial structure of check cashing? At the risk of making a large assumption, that does not seem like it would help you feel included.
Yes, the sentimental sensationalist yellow journalists at ProPublica have really gone over the top with that one. Oh brother.
> a big chunk of the tech crowd no matter how much noise they make about inclusivity.
Technology was supposed to reduce these barriers, but in a lot of ways it has magnified them, creating a new pseudo social caste system or perhaps just an extreme shift in the existing order. Noticing that the promise of the 1990s has fallen flat they turn to blind pushes for inclusion as an embarrassed justification for their position in this new order.
Technology was supposed to reduce these barriers, but in a lot of ways it has magnified them, creating a new pseudo social caste system or perhaps just an extreme shift in the existing order. Noticing that the promise of the 1990s has fallen flat they turn to blind pushes for inclusion as an embarrassed justification for their position in this new order.
I disagree, especially for what the linked article is talking about.
Suppose a business or individual accepts checks and electronic funds transfers for payment.
Are they going to apply their prior probabilities (your various -isms such as racism, etc), in regards to whether or not the payment will actually be successfully received?
Whereas an instant payment and confirmation via the use of internet and databases alleviates this motivation to discriminate.
Suppose a business or individual accepts checks and electronic funds transfers for payment.
Are they going to apply their prior probabilities (your various -isms such as racism, etc), in regards to whether or not the payment will actually be successfully received?
Whereas an instant payment and confirmation via the use of internet and databases alleviates this motivation to discriminate.
HackerNews is starting to realize that "Diversity and Inclusion" is a ham-fisted scam.
I also thought the article had interesting information, and the brisk "I'm just being honest about how things are in the world" tone was initially fun but was darkened by the hints of callous bias that bled through:
> Compassion gets burned out of the owner and burned out of the clerk in basically the same ways that it gets burned out of everyone else in the neighborhood.
This reflects a false belief that people who live in poor neighborhoods are less compassionate. In fact research suggests that people living in poverty tend to be more compassionate towards each other than rich people are toward the impoverished. It's comforting for wealthier people to hold this belief, because it makes us feel less bad about our own lack of compassion.
And the point of the below paragraph seems to be that it's difficult or unpleasant to think about systemic injustice, so let's avoid it?
> And, not to put too fine a point on it, it’s really hard to expressively, passionately hate this business and not hate the young lady working in it, the decisions and life challenges of its customers, and similar. And if you hate one particular building in a poor neighborhood, and then start rigorously thinking about the liquor store, or the police station, or the supermarket, or the church, or the public school, or the home in the poor neighborhood, I think your mind will start going to some pretty dark places.
> Compassion gets burned out of the owner and burned out of the clerk in basically the same ways that it gets burned out of everyone else in the neighborhood.
This reflects a false belief that people who live in poor neighborhoods are less compassionate. In fact research suggests that people living in poverty tend to be more compassionate towards each other than rich people are toward the impoverished. It's comforting for wealthier people to hold this belief, because it makes us feel less bad about our own lack of compassion.
And the point of the below paragraph seems to be that it's difficult or unpleasant to think about systemic injustice, so let's avoid it?
> And, not to put too fine a point on it, it’s really hard to expressively, passionately hate this business and not hate the young lady working in it, the decisions and life challenges of its customers, and similar. And if you hate one particular building in a poor neighborhood, and then start rigorously thinking about the liquor store, or the police station, or the supermarket, or the church, or the public school, or the home in the poor neighborhood, I think your mind will start going to some pretty dark places.
> This reflects a false belief that people who live in poor neighborhoods are less compassionate. In fact research suggests that people living in poverty tend to be more compassionate towards each other than rich people are toward the impoverished. It's comforting for wealthier people to hold this belief, because it makes us feel less bad about our own lack of compassion.
From what I recall, its less that the poor are more compassionate, instead they participate in _reciprocal altruism_ as a form of insurance against further loss. I remember this talk https://www.youtube.com/watch?v=AchISJUKfH4 -- poor people make seemingly dumb decisions because if they don't help their social network when it comes knocking, they're in effect _cutting themselves off_ from said network.
The middle class is more insulated from this effect because those with emergency savings don't often need to borrow $500 because of a broken car or need to house their recently homeless sister and children, so capital can accumulate more easily.
From what I recall, its less that the poor are more compassionate, instead they participate in _reciprocal altruism_ as a form of insurance against further loss. I remember this talk https://www.youtube.com/watch?v=AchISJUKfH4 -- poor people make seemingly dumb decisions because if they don't help their social network when it comes knocking, they're in effect _cutting themselves off_ from said network.
The middle class is more insulated from this effect because those with emergency savings don't often need to borrow $500 because of a broken car or need to house their recently homeless sister and children, so capital can accumulate more easily.
> the assumption that the topic is alien to and deeply beneath anyone reading the article is obnoxious
So the author is being anti-inclusive by defining precisely what they are talking about? I assume you've seen the XKCD about "15k people a day dont know what X is", you're committing the same elitist reasoning, that someone is an idiot for not knowing a thing.
So the author is being anti-inclusive by defining precisely what they are talking about? I assume you've seen the XKCD about "15k people a day dont know what X is", you're committing the same elitist reasoning, that someone is an idiot for not knowing a thing.
> If you are reading this, you probably are relatively wealthy, are almost certainly of high socioeconomic status, and quite plausibly have never paid one red cent for check cashing in your entire life.
Explicitly stating unfounded assumptions about your audience doesn't change the fact that they are unfounded assumptions. A whole hell of a lot of people in our country have relied on check cashing services regularly at some point, and believe it or not, many of us read blog posts just like them proper folks from polite society.
Explicitly stating unfounded assumptions about your audience doesn't change the fact that they are unfounded assumptions. A whole hell of a lot of people in our country have relied on check cashing services regularly at some point, and believe it or not, many of us read blog posts just like them proper folks from polite society.
I think you're just trying to make a self-aggrandizing statement that everyone else in tech is so snooty, but no, not you. You're so woke and connected that you find it insulting that an author has the gall to try to educate people about a problem in society.
Reread my initial comment without the knee-jerk reaction to the word “inclusive,” then objectively consider how reasonable your accusation is.
I can immediately tell this is DALLE3 generated. It’s a little funny that the person accepting the check has shadow that looks a hitler mustache.
The DALL-E generated hero image is terrible, and the tone of the article is beyond patronising, I couldn’t get past the “money transfer between banks is magic”.
That’s a misquote. The author says to assume that it is magic and the reason for that is that it’s not the topic of the blog post. This makes complete sense to me since the article is long enough already.
It’s just one example of the insufferably patronising tone of the article. Just stating that a bank transfer happens is enough. No need to assume anything. Making the assumption that an explanation is required is totally unnecessary.
One of my favorite types of establishments here in America is a bar that cashes checks. If you really want to get a sense of how some people radically different than you live their lives, spend some time at the counter after the construction sites close for the day and people stumble in with their day's pay.
I nodded along whole-heartedly into the digression on banking and class in America. When you actually think about what's going on in these places, it's a wonderfully curious twist on our idea of "trustworthiness".
I nodded along whole-heartedly into the digression on banking and class in America. When you actually think about what's going on in these places, it's a wonderfully curious twist on our idea of "trustworthiness".
In Nevada, casinos will cash your checks for you.
I never use cheques, but had a strange cheque related situation a few years ago. For some reason an empty bank account that I never use had gone £100 overdrawn, supposedly due to a cheque that had been cached, and was racking up fees.
After hours of phone calls, I learnt that bank account numbers are recycled (!) after accounts are closed.. so the previous owner of my account number had tried to cache a cheque using a legitimate chequebook that they still owned.
Still amazes me that the system could be so insecure!
After hours of phone calls, I learnt that bank account numbers are recycled (!) after accounts are closed.. so the previous owner of my account number had tried to cache a cheque using a legitimate chequebook that they still owned.
Still amazes me that the system could be so insecure!
That’s wild. Several years ago I closed an account. Then 8 months later I got a negative balance statement. It was a NSF because a recurring ACH subscription renewed and the vendor ACH’d my account. My bank told me they did close the account when I requested but ACH attempts will reopen the account even months later.
Even crazier, the merchant initiating the ACH had been refusing to cancel my subscription and my bank recommended just closing the account as the fix for that at the time. Partially because I wasn’t using it actively, I think there were other ways this just happened to be the simplest. But it didn’t work because of said reopening of account.
Also, the merchant got $0 as it was NSF. But bank charged a couple $35 fees IIRC causing the negative balance. They really didn’t want to waive them and I ended up talking to like 3 layers of management to get it resolved. I was just like, “of course it was NSF how/why would I leave a balance in a closed account? Why don’t you reject the ACH some other way? Your business logic is fucked up”
Even crazier, the merchant initiating the ACH had been refusing to cancel my subscription and my bank recommended just closing the account as the fix for that at the time. Partially because I wasn’t using it actively, I think there were other ways this just happened to be the simplest. But it didn’t work because of said reopening of account.
Also, the merchant got $0 as it was NSF. But bank charged a couple $35 fees IIRC causing the negative balance. They really didn’t want to waive them and I ended up talking to like 3 layers of management to get it resolved. I was just like, “of course it was NSF how/why would I leave a balance in a closed account? Why don’t you reject the ACH some other way? Your business logic is fucked up”
My understanding is that the other individual has committed several felony crimes to write that check (various forms of banking fraud and theft), and given their signature to it as well, as evidence of both intent and proof of their identity. So it seems to me about as insecure as saying "I can't believe the sidewalks here are so insecure near roads, that a car could just drive down onto them and hit people." The idea is not to make it hard to move money around, but to instead make the punishment very high for trying to cheat the system.
Given the stated currency, I suspect the bank account in question is in the UK, so the criminal law wouldn't be entirely identical. But in any case, it wasn't necessarily a crime -- someone (especially if elderly or impaired) might have accidentally used the wrong chequebook. It's only a crime to write a cheque on someone else's account if you do it deliberately.
To me, the biggest issue here is simply "banks should not recycle account numbers".
To me, the biggest issue here is simply "banks should not recycle account numbers".
Sometimes relying on deterrence is necessary, but it's surprising to do it when there are seemingly easier ways - like not reusing account numbers.
I think this would happen more often with people with many accounts and many checkbooks accidently using the wrong book after closing an account, by accident.
I had precisely this, 25 years ago - I came back from a few months abroad to find a pile of letters from my new bank, NatWest, and nearly £1,000 of fees from them for a cheque that I hadn’t written that had bounced, as I had left the account empty, having just opened it.
As I was a broke student with few options, I ended up having to default on it, which did wonders for my credit rating for a good long while.
As I was a broke student with few options, I ended up having to default on it, which did wonders for my credit rating for a good long while.
> due to a cheque that had been cached
Cache invalidation is hard.
Cache invalidation is hard.
Cheque was cashed, but the account number was indeed cached.
That's crazy. Account numbers are 8 digits, and large banks have many sort codes, historically one per branch. Why would they need to reuse a number?
This'll be obvious to anyone who's ever used any other payment system, but it'd be better if more of the risk of payment was borne by the payer rather than the payee. For example, re. this line from the article:
> In the case where [...] the government later comes to the conclusion that it didn't really want to pay them
If the government comes to that conclusion, and has a legitimate reason (e.g. you didn't do the work they paid you to do), they should have ample ability to take you to court to get the money back. By making the payee cover this risk, they're essentially paying for the untrustworthiness of other payees.
> In the case where [...] the government later comes to the conclusion that it didn't really want to pay them
If the government comes to that conclusion, and has a legitimate reason (e.g. you didn't do the work they paid you to do), they should have ample ability to take you to court to get the money back. By making the payee cover this risk, they're essentially paying for the untrustworthiness of other payees.
How well known you are to the bank matters. My grandfather was a builder and if he didn't have his checkbook on him, he would pay a subcontractor via a check written on whatever piece of scrap wood was around. The local bank had no problem with depositing it because he'd done it many times before and he had a good reputation in town.
Many of the rules and regulations have come about because writing checks became a non-local thing. You'd send off a check to pay for a magazine subscription and it'd get processed somewhere far away, like South Dakota. They don't know who you are, so like the article said - writing a check became an extension of credit, and the writer needed some verification as to their creditworthiness.
Many of the rules and regulations have come about because writing checks became a non-local thing. You'd send off a check to pay for a magazine subscription and it'd get processed somewhere far away, like South Dakota. They don't know who you are, so like the article said - writing a check became an extension of credit, and the writer needed some verification as to their creditworthiness.
Woah, what year? How can this be legal?
This was the late 1930's so quite long ago. Pretty much every bank now has policies that would cause them to seriously object to a roof shingle being used as a check. So not illegal - just very unlikely to be accepted.
Could you create your own paper checks? I think you can, as long as it looks/feels like a check and has all the info on it in the correct places. You don't have to use any security features to prevent check washing (but it's a good idea). You don't even need the magnetic ink, as the check will be optically scanned, with hand-processing as a fallback (they will attach a MICR correction strip).
https://en.wikipedia.org/wiki/Magnetic_ink_character_recogni...
Could you create your own paper checks? I think you can, as long as it looks/feels like a check and has all the info on it in the correct places. You don't have to use any security features to prevent check washing (but it's a good idea). You don't even need the magnetic ink, as the check will be optically scanned, with hand-processing as a fallback (they will attach a MICR correction strip).
https://en.wikipedia.org/wiki/Magnetic_ink_character_recogni...
> That is certainly not the only pathway to being non-banked, but it is an extremely common one. Often, consumers self-select out because they try banking for a while and then repeatedly get assessed high fees which they do not feel are legitimate, such as fees for overdrafting their accounts. To bang a very old drum, the decision to move from everyone-pays-a-Netflix-subscription-for-banking to banking-is-free-except-we-assess-high-fees-if-you-screw-up created winners and losers. We called that one "free checking." Descriptively it subsidizes the middle class by using fees assessed stochastically to people in persistent economic precarity. In particular, young members of the middle class (college students and recent graduates in their least-well-off years) benefitted a lot.
Though I wonder whether you could just get an account where your deposited checks just take a while to clear (when the bank actually has the money)? And where any attempt at overdrafting would just fail?
Basically, a bank account where the bank does not extend you credit. A purely 'pre-paid' affair.
I guess the kinds of people who would want these accounts are on average not good customers?
(I know that they have these kinds of accounts in eg Germany where I grew up. But your average German is averse to taking on debt; so you just get average Germans signing up, instead of the adverse selection you'd have in the US?)
Though I wonder whether you could just get an account where your deposited checks just take a while to clear (when the bank actually has the money)? And where any attempt at overdrafting would just fail?
Basically, a bank account where the bank does not extend you credit. A purely 'pre-paid' affair.
I guess the kinds of people who would want these accounts are on average not good customers?
(I know that they have these kinds of accounts in eg Germany where I grew up. But your average German is averse to taking on debt; so you just get average Germans signing up, instead of the adverse selection you'd have in the US?)
>>Basically, a bank account where the bank does not extend you credit. A purely 'pre-paid' affair.
That's like......every normal bank account? At least in Poland, UK and Germany(as you mentioned). By default you don't get any overdraft, you can't go below zero so to speak. If you do(with an offline transaction that wasn't authorized live with the bank) then usually you get 24 hours to pay it off and start paying heavy penalties beyond that point.
That's like......every normal bank account? At least in Poland, UK and Germany(as you mentioned). By default you don't get any overdraft, you can't go below zero so to speak. If you do(with an offline transaction that wasn't authorized live with the bank) then usually you get 24 hours to pay it off and start paying heavy penalties beyond that point.
Many of my friends even went as far as using that as a method to handle their personal finance as students.
Transfer most of the money to the savings account and then when getting declined buying food top up the card account and rely on it instantly being available. Having negative trigger each time going above the pre-planned spending for the month.
Hell, I still do it. I have one card for groceries which gives me a mental picture of how much I have spent on food given what day it is when it gets declined each month.
I would presume this comes from being the generation that grew up only knowing about debit cards. Most got a personal one at the age of 13 or so and never really used cash. Guessing it is even earlier today.
Didn't get a credit card until first time I was planning to rent a car when travelling knowing how much easier it would be.
Transfer most of the money to the savings account and then when getting declined buying food top up the card account and rely on it instantly being available. Having negative trigger each time going above the pre-planned spending for the month.
Hell, I still do it. I have one card for groceries which gives me a mental picture of how much I have spent on food given what day it is when it gets declined each month.
I would presume this comes from being the generation that grew up only knowing about debit cards. Most got a personal one at the age of 13 or so and never really used cash. Guessing it is even earlier today.
Didn't get a credit card until first time I was planning to rent a car when travelling knowing how much easier it would be.
> Didn't get a credit card until first time I was planning to rent a car when travelling knowing how much easier it would be.
I still don't use a credit card for that. I have a debit card that's part of Visa, so most businesses don't care whether it's debit or credit.
I still don't use a credit card for that. I have a debit card that's part of Visa, so most businesses don't care whether it's debit or credit.
They definitely do though - all big brands like Avis, Europcar, Hertz will refuse a Visa Debit card, it has to be a Credit card - I always have to use smaller local rental companies which are willing to take a risk on a debit card. At least that has been my experience renting around Europe.
Interesting. I'm mostly in Asia and Australia these days. Though recently I rented a car in the Netherlands, and my debit card was just fine.
(I don't have a credit card.)
(I don't have a credit card.)
There is a large population of people in America that depend on being able to overdraft. It doesn't make sense to me, it doesn't make sense to you, but if they were given the option between "overdraft" and "no overdraft" they will always choose overdraft. It's important to be aware of this use case for understanding the US system as practiced.
IME they eventually end up abusing it (repeatedly not paying the fees) and then the bank closes their account, at which time they move on. One way they strategically avoid or delay paying the fees if they can't / don't want to is by avoiding direct deposit. Then, you can either deposit the check (ready to pay overdraft fees and get account positive) or cash the check at a check-cashing (for a fee that will likely be less than the overdraft + overdraft fees).
IME they eventually end up abusing it (repeatedly not paying the fees) and then the bank closes their account, at which time they move on. One way they strategically avoid or delay paying the fees if they can't / don't want to is by avoiding direct deposit. Then, you can either deposit the check (ready to pay overdraft fees and get account positive) or cash the check at a check-cashing (for a fee that will likely be less than the overdraft + overdraft fees).
> That's like......every normal bank account?
No. Every normal bank account can go overdrawn. Try it: low value purchases or withdrawals are not transactional (they are eventually consistent).
No. Every normal bank account can go overdrawn. Try it: low value purchases or withdrawals are not transactional (they are eventually consistent).
In most EU banks a line of credit is something you apply for. Cards are usually also attached directly to the account.
Banks in Denmark are obligated to extend a basic account to all customers and usually do it with a debit card. Ie. no offline transactions and no transactions that can not be immediately cleared.
I don't know why you dismiss this. If you are from the US then be aware that EU and US banking systems are wildly different (where the US system is really good for the wealthy people).
If you are from EU, then it sounds like you haven't changed your banking situation or stayed up to date in at least 15 years.
Banks in Denmark are obligated to extend a basic account to all customers and usually do it with a debit card. Ie. no offline transactions and no transactions that can not be immediately cleared.
I don't know why you dismiss this. If you are from the US then be aware that EU and US banking systems are wildly different (where the US system is really good for the wealthy people).
If you are from EU, then it sounds like you haven't changed your banking situation or stayed up to date in at least 15 years.
In the US, it's possible to become overdrawn even if you wait for a check to clear. Assuming there is a check "writer" and a check "casher"
- A portion of the check is made available to the casher (said to be "cleared", but not really) before the writer's bank even responds
- After the writer's bank has cleared the check, it can still reverse the transaction and take back the funds. For example, if the check is found to be fraudulent.
So, for example, you can deposit a check into your account, wait a month to be sure it's cleared, take the money out, and then have the money "taken back"; leaving your account in the negative. As such, even for accounts that don't have any "line of credit", the bank still winds up "lending you money". Effectively, EVERY bank account in the US has credit built into it in some way.
- A portion of the check is made available to the casher (said to be "cleared", but not really) before the writer's bank even responds
- After the writer's bank has cleared the check, it can still reverse the transaction and take back the funds. For example, if the check is found to be fraudulent.
So, for example, you can deposit a check into your account, wait a month to be sure it's cleared, take the money out, and then have the money "taken back"; leaving your account in the negative. As such, even for accounts that don't have any "line of credit", the bank still winds up "lending you money". Effectively, EVERY bank account in the US has credit built into it in some way.
It definitely seems like there are some bad policy going on here. I would recommend lobbying to have it changed – None of these things can happen in EU countries, so it is not technically given that it has to work like that.
How does it work to where fraudulent checks can’t be clawed back in the EU?
You can't write checks. You give your bank account number and the debit is done online in real time.
And what happens if they transfer money to you via debit online in real time, and then _that_ turns out to be fraudulent. Does the bank that paid the money to you get it back from your bank, or does it eat the cost?
Note that, when we're talking about a fraudulent cheque, and it being clawed back, it's already been cleared by the source bank. As such, there is no longer a difference between the check and a real time debit.
Note that, when we're talking about a fraudulent cheque, and it being clawed back, it's already been cleared by the source bank. As such, there is no longer a difference between the check and a real time debit.
Approximately nobody uses any checks in the EU countries we are talking about here. (And I don't think those accounts would come with a check book. That's something you specifically have to ask for, and might come with a credit check.)
I had a lot of frustration in the UK, when I tried to get a bank account that could not be overdrawn.
Basically, I wanted the German experience where your transaction is just declined, if you don't have the funds, without further repercussions. In the UK, the banks might or might not approve that transaction, and definitely charge you an outrageous fee either way.
The only choice on offer in the UK at the time was whether you pre-arrange an overdraft, which is slightly cheaper (but still expensive). Or whether they give an you an 'unarranged overdraft', which you can't not accept, which is crazy expensive.
Basically, I wanted the German experience where your transaction is just declined, if you don't have the funds, without further repercussions. In the UK, the banks might or might not approve that transaction, and definitely charge you an outrageous fee either way.
The only choice on offer in the UK at the time was whether you pre-arrange an overdraft, which is slightly cheaper (but still expensive). Or whether they give an you an 'unarranged overdraft', which you can't not accept, which is crazy expensive.
The easiest way would probably be ro get a Revolut/Wise account and charge it from the account that can go in overdraft.
But I agree, the traditional banks have had a hard time getting up to speed while new banks seems to see it as a way to handle their liability: At Revolut scale you can not manage individual customers with negative balance while offering the service at a competitive price point.
But I agree, the traditional banks have had a hard time getting up to speed while new banks seems to see it as a way to handle their liability: At Revolut scale you can not manage individual customers with negative balance while offering the service at a competitive price point.
Revolut and Wise (and Monzo) were only just getting started when my story happened.
At the end (around 2017 or so), I got a Monzo account, and was very happy with them.
At the end (around 2017 or so), I got a Monzo account, and was very happy with them.
Well yes, but (at least in my experience) there is no fee for just going into an unarranfed overdraft, as long as you've paid it off within 24 hours.
My UK bank at the time (I think it was NatWest or Santander or so) charged me for every (attempted) payment or (attempted) withdrawal, even when they failed.
that is precisely what “overdraft fees” means
Britain does have a "basic account", usually used by people with debt problems. It has no unarranged overdraft facility.
Example: https://www.barclays.co.uk/current-accounts/basic-account/
I assume the debit card is configured to refuse offline transactions.
Example: https://www.barclays.co.uk/current-accounts/basic-account/
I assume the debit card is configured to refuse offline transactions.
Yes - you can't make offline card transactions, you don't get a chequebook, but there are no overdraft fees because there's no overdraft facility. The nine largest banks are legally required to offer Basic Bank Accounts to practically anyone.
This, combined with the fact that welfare must be paid by bank transfer in nearly all circumstances, means that a) essentially everyone in the UK has a bank account and b) cheque cashing isn't really a thing. Some banks have an account-opening service specifically for people with no fixed address and/or no identity documents.
From a UK perspective, the situation in the US just looks like a completely avoidable policy failure.
https://assets.publishing.service.gov.uk/media/63f7bbd78fa8f...
https://england.shelter.org.uk/professional_resources/no_fix...
This, combined with the fact that welfare must be paid by bank transfer in nearly all circumstances, means that a) essentially everyone in the UK has a bank account and b) cheque cashing isn't really a thing. Some banks have an account-opening service specifically for people with no fixed address and/or no identity documents.
From a UK perspective, the situation in the US just looks like a completely avoidable policy failure.
https://assets.publishing.service.gov.uk/media/63f7bbd78fa8f...
https://england.shelter.org.uk/professional_resources/no_fix...
>>usually used by people with debt problems.
That's the first time I've ever heard that assumption, and I live in the UK - basic checking account(with no overdraft) is just what everyone has by default, if you want credit you just apply for a credit card - that's my experience at least.
That's the first time I've ever heard that assumption, and I live in the UK - basic checking account(with no overdraft) is just what everyone has by default, if you want credit you just apply for a credit card - that's my experience at least.
It is literally in the subheading on the Barclay's page I linked: "If you don’t qualify for a regular current account, don’t yet have a UK account, or you’re experiencing financial difficulty, this could be the right account for you."
Most people have an ordinary account like this one: https://www.barclays.co.uk/current-accounts/bank-account/
However, the general situation for overdrafts seems to have changed since I left the UK — I don't know the details: https://www.theguardian.com/business/2020/jan/28/uk-banks-ov...
Most people have an ordinary account like this one: https://www.barclays.co.uk/current-accounts/bank-account/
However, the general situation for overdrafts seems to have changed since I left the UK — I don't know the details: https://www.theguardian.com/business/2020/jan/28/uk-banks-ov...
Well yes sorry - the linked account is indeed a "basic" account for people in difficult position, I suppose. But what Barclays calls "regular current account" also doesn't have any overdraft, not unless you applied for one.
When I was living in the UK I tried to get an account with no 'unarranged overdraft' but the banks I tried with made it hard enough that I gave up.
You needed the magic word "basic", and confidence in your right to the account.
The banks presumably make a loss on these accounts, at least in the short term, and seem to hope you'd give up and try with a different bank.
A Bulgarian guy in a flat share was keeping his money under the bed as he had been turned away by the banks. I printed the "Basic" account information and with that in hand he had an account the next day.
(This might all be 10-15 years out of date.)
The banks presumably make a loss on these accounts, at least in the short term, and seem to hope you'd give up and try with a different bank.
A Bulgarian guy in a flat share was keeping his money under the bed as he had been turned away by the banks. I printed the "Basic" account information and with that in hand he had an account the next day.
(This might all be 10-15 years out of date.)
So what happens if a deposit is reversed when there aren’t sufficient funds to cover it?
It’s a good question. There aren’t many circumstances that this would happen, however when it does there are still no fees on the account (at least the ‘Cash Account’ at the bank I worked at) - it would go into a negative balance, not incur any fees and when the next credits came in, they’d get eaten by the negative balance.
This usually meant the customer would need to call up a service centre, who would arrange a ‘planned overdraft’ of sorts, still with zero fees, but it would allow them access to a portion of their funds and we’d do the same again the following week and so on.
Very inconvenient for all involved, these people are often completely financially illiterate (and frequently just illiterate) and have zero clue how to manage their bank account. I tried to educate them consistently, but week in week out I had the same conversations with the same people when they didn’t understand how they had no funds available to them, even though they’d been ‘paid’ that day.
This usually meant the customer would need to call up a service centre, who would arrange a ‘planned overdraft’ of sorts, still with zero fees, but it would allow them access to a portion of their funds and we’d do the same again the following week and so on.
Very inconvenient for all involved, these people are often completely financially illiterate (and frequently just illiterate) and have zero clue how to manage their bank account. I tried to educate them consistently, but week in week out I had the same conversations with the same people when they didn’t understand how they had no funds available to them, even though they’d been ‘paid’ that day.
honestly thanks for responding in good faith/spirits, probably was a bit overly snarky
I appreciate the thought put into the answer, and I do grasp that the point is that the EU system has converged on much faster resolution times than the US and different social systems based on that etc. There just always are tons and tons of weird edge-cases (what if you get a court-ordered transaction reversal or order to the bank somehow etc) that lead to the same "you're overdrafted, and you have to pay up and then pay a fee..."
I appreciate the thought put into the answer, and I do grasp that the point is that the EU system has converged on much faster resolution times than the US and different social systems based on that etc. There just always are tons and tons of weird edge-cases (what if you get a court-ordered transaction reversal or order to the bank somehow etc) that lead to the same "you're overdrafted, and you have to pay up and then pay a fee..."
I reckon the situation would be, eg., a waiter taking a check on a card.
First: this situation does not happen in EU. Alle restaurants have connected handheld devices.
But when an EU citizen go to the US and pays? I reckon that the restaurant would have a check that bounces and won't get paid.
First: this situation does not happen in EU. Alle restaurants have connected handheld devices.
But when an EU citizen go to the US and pays? I reckon that the restaurant would have a check that bounces and won't get paid.
[deleted]
You can't really overdraft a polish bank account that doesn't have explicitly declared overdraft facility.
This is combined with the fact that no account supports cheques anymore.
This is combined with the fact that no account supports cheques anymore.
This is touched on in the article. In fact a fintech startup Ingo Money is trying this.
> And then there’s one decision which I just love aesthetically: if you’re willing to wait ten days, Ingo will discount your fee straight to zero. Why ten days? It is past the window where fraud discovery will result in the funds being clawed back plus (ahem) a bit of annoyance tacked on as a product decision.
> And then there’s one decision which I just love aesthetically: if you’re willing to wait ten days, Ingo will discount your fee straight to zero. Why ten days? It is past the window where fraud discovery will result in the funds being clawed back plus (ahem) a bit of annoyance tacked on as a product decision.
Yes, I saw that later as I read further.
That's exactly what I would want to use, if I had to use checks. (Luckily, I don't ever have to interact with checks.)
That's exactly what I would want to use, if I had to use checks. (Luckily, I don't ever have to interact with checks.)
That is always funny to hear complaints about high credit/overdraft fees. If they are high for individual how about not to use credit and there will be no fees?
Huh? That's exactly what I wanted!
I wanted an account that would not give me any credit. I did not want any credit.
But I also wanted the bank to do the mental arithmetic for me, and just refuse when I don't have enough funds. Instead of me having to carefully track my balance manually, lest I accidentally use any credit I don't want to.
(For context: I usually try to keep my liquid balance fairly low, and stick the rest into savings and/or investments.
It's ok for me, if a payment bounces every once in a while because of that. It's all about trade-offs. I can usually fix it pretty quickly by transferring some money from my savings account, or from my brokerage.
With an account that helps me there, by not offering any unwanted credit at all, I can manage my finances a bit more aggressively, instead of having to keep up some safety cushion against arithmetic mistakes on my part.)
See also https://news.ycombinator.com/item?id=39201675 for how that non-overdraft account works in practice for people who don't want to take on credit, but also don't want to have all their money in their 'checking' account.
I wanted an account that would not give me any credit. I did not want any credit.
But I also wanted the bank to do the mental arithmetic for me, and just refuse when I don't have enough funds. Instead of me having to carefully track my balance manually, lest I accidentally use any credit I don't want to.
(For context: I usually try to keep my liquid balance fairly low, and stick the rest into savings and/or investments.
It's ok for me, if a payment bounces every once in a while because of that. It's all about trade-offs. I can usually fix it pretty quickly by transferring some money from my savings account, or from my brokerage.
With an account that helps me there, by not offering any unwanted credit at all, I can manage my finances a bit more aggressively, instead of having to keep up some safety cushion against arithmetic mistakes on my part.)
See also https://news.ycombinator.com/item?id=39201675 for how that non-overdraft account works in practice for people who don't want to take on credit, but also don't want to have all their money in their 'checking' account.
I know this article is very informative, and I typically like to keep discussion substantive, but that artwork at the top really distracted me from actually reading for a good few minutes.
I don't really care of it's AI or not. The picture is just strange. The empty hoodie just standing by the window, watching a worker who is seemingly undisturbed by it. The odd placement of the desks, the fact that all of the text is gibberish, but looks just close enough to real that you pause to examine it. Except for the big "CHECK" on the wall, which isn't something you'd actually see in a real establishment that cashes checks.
More and more, I see companies using art that they would refuse to pay for if a contracted illustrator turned it in. Seemingly because it's AI, it's like they become blind to how bad it is.
I don't really care of it's AI or not. The picture is just strange. The empty hoodie just standing by the window, watching a worker who is seemingly undisturbed by it. The odd placement of the desks, the fact that all of the text is gibberish, but looks just close enough to real that you pause to examine it. Except for the big "CHECK" on the wall, which isn't something you'd actually see in a real establishment that cashes checks.
More and more, I see companies using art that they would refuse to pay for if a contracted illustrator turned it in. Seemingly because it's AI, it's like they become blind to how bad it is.
Yikes, it really is distracting. What really gets me is the screwed up, subtly M C Escher like perspective.
Also, yeah, this looks like a weird bank / accountant's tax office pastiche, not at all like a check cashing place.
It's patio11 though, all of whose writing on the nuts and bolts of finance are fascinating, so it's easily forgiven, heh
Edit: in fact I'm already 3 paragraphs in and so fascinated by the, typical for patio11, high level of detail combined with easy novel like readability, that I almost feel guilty for having piled on to criticize the awful AI image. But still, yeah, I agree AI images like this are actually worse than no illustration at all
Also, yeah, this looks like a weird bank / accountant's tax office pastiche, not at all like a check cashing place.
It's patio11 though, all of whose writing on the nuts and bolts of finance are fascinating, so it's easily forgiven, heh
Edit: in fact I'm already 3 paragraphs in and so fascinated by the, typical for patio11, high level of detail combined with easy novel like readability, that I almost feel guilty for having piled on to criticize the awful AI image. But still, yeah, I agree AI images like this are actually worse than no illustration at all
Right? That's why I was hesitant to bring this up too. But the picture really is that distracting.
Like, the article's good enough that it doesn't need an image. Or if you really think you need it, grab some free stock photo or clipart or something.
Or get good AI art. Don't settle for bad AI art.
Like, the article's good enough that it doesn't need an image. Or if you really think you need it, grab some free stock photo or clipart or something.
Or get good AI art. Don't settle for bad AI art.
Yeah, at least touch up the text so it isn't just gibberish (besides for "CHECK"). But I guess this is what happens when someone with (presumably) no graphics skills gets an image out of AI - they are powerless to tweak it.
This is a blog post by a rather small operation (probably one guy). If AI-generated-imagery weren't available, he would've used a stock photo or nothing at all. I doubt very much he would've paid an illustrator for it. So no he's not blind to it, he just doesn't care, or has decided that the low quality is worth the low price. Analogous to the situation in the article.
This is a perfect example of what I’ve been saying for a few years: Artists’ value is almost entirely in their ability to figure out exactly what should be in a piece to visually communicate an idea— not in their ability to make the pieces themselves. And it’s not even like this ill-conceived generated graphic is better than no graphic at all… Even in a blog post, the author’s lack of visual vocabulary makes the whole piece worse. Is not just AI— you can certainly buy the wrong stock photo, for example, but the photographer’s skill and the service’s curation makes mini golf out of a golf-sized task.
>Artists’ value is almost entirely in their ability to figure out exactly what should be in a piece to visually communicate an idea— not in their ability to make the pieces themselves.
Practice has shown the two to be inseparable, presuming you mean artistic value rather than market value. They inform each other. Furthermore, no valuable idea or piece of art can be owed to a single person.
Practice has shown the two to be inseparable, presuming you mean artistic value rather than market value. They inform each other. Furthermore, no valuable idea or piece of art can be owed to a single person.
You've missed the point, entirely. I'm not talking about credit, I'm talking about capability. By any measure, the image at the top of the article is polished and it grabs your attention, and if an artist had made it by hand, even experienced artists would commend their solid technical art skills. It also sucks so much at accomplishing its job as a communication tool that it detracts from the article content for many people. A layman having powerful image generation tools doesn't make them capable of communicating ideas visually any more than copilot makes laymen capable of designing sane software architecture, or having Grammarly would make them any better technical writers. People that don't think so don't realize how much they don't understand about solving communication problems with imagery. There are plenty of lifelong fine artists that could whip my ass making compelling imagery in physical media, but would still need years to learn the fundamentals of visual communication. It's a set of skills that need to be learned and practiced, and making the images themselves is probably the least consequential part of it. Art directors generally don't make any images at all, and the idea that someone could step in and do their job because they could whip up a bunch of slick-looking junk at a prompt is beyond hilarious.
What is an "art director" though? We're talking about artists. There's a reason they don't share the same title and everybody knows it.
Auteur theory exists for good reason. Good art cannot be imagined merely in the mind, only self-flatulating bullshit can. One must engage and prove and iterate and exercise all the unlikely leaps that must be made to go from medium to meaning to detail. Image generators are just shitty art directors and neither is practicing art.
Auteur theory exists for good reason. Good art cannot be imagined merely in the mind, only self-flatulating bullshit can. One must engage and prove and iterate and exercise all the unlikely leaps that must be made to go from medium to meaning to detail. Image generators are just shitty art directors and neither is practicing art.
How glib. In the future, when avoiding addressing everything someone says, you can save yourself some time by not entering the conversation thread.
The image is worth a few comments. No artist would ever do this. The text, the stool legs, the paperweights, the wristwatches, the shoes, and all other little details are quite terrible.
Bloggers will swallow a lot for four cents (the cost of a single decent Hd DallE3 image generation via the API).
Actually I think they edited in the "CHECK" sign, the other texts in the image (the sign of the shop across the street, the text on the terminal to the left) are the usual "AI-generated gibberish".
Patrick does not mention that a primary reason even the "banked" use check cashing services is that deposited funds are trivially legible for the purposes of attaching court judgements, particularly child support. Cash is far more difficult to trace.
The visibility would also come from paying child support via any kind of bank transfer? It's only the cash that is difficult to trace (and requires people to actually meet, which seems another big downside in the child support payment scenario).
At least in poland, the standard measure from simplest payments to settling overdue debt between companies or to government, is "bank confirmation" - a printout/pdf from a bank declaring that a transaction with those details was made at this time.
How so? The court issues wage garnishments, it gets taken out of the check directly. This might help people paid under the table or in checks from clients but I think that’s a small cohort.
I have no experience with this but my understanding is that they don’t go straight to wage garnishes (which I’ve heard the bureaucracy is slow to handle in situations where the garnished individual moves). That happens if you don’t meet payments as required.
I did a lot of work on remote deposit when Check 21 came out (the legislation that paved the way for images of checks to be used in place of the paper monetary instrument).
It's crazy what occasionally got passed through. I remember a VP complaining about a failed deposit - the cheque image was a completely unintelligible scrawl of blocky black pixels - like white noise on an old TV. I explained why it got flagged by the software and that it wasn't eligible for deposit. They didn't care - uploaded it to the bank who happily cleared it for them with funds available instantly.
It's all about how big a customer you are, you're perceived risk profile and your relationship with the bank.
It's crazy what occasionally got passed through. I remember a VP complaining about a failed deposit - the cheque image was a completely unintelligible scrawl of blocky black pixels - like white noise on an old TV. I explained why it got flagged by the software and that it wasn't eligible for deposit. They didn't care - uploaded it to the bank who happily cleared it for them with funds available instantly.
It's all about how big a customer you are, you're perceived risk profile and your relationship with the bank.
Also recommend "The Unbanking of America: How the New Middle Class Survives" by Lisa Servon on the topic.
https://www.npr.org/2017/01/10/509126878/what-is-driving-the...
https://mitpressbookstore.mit.edu/book/9781328745705
https://www.npr.org/2017/01/10/509126878/what-is-driving-the...
https://mitpressbookstore.mit.edu/book/9781328745705
I don't understand. There is a near-infinite number of banks and credit unions that don't charge fees or allow over drafting.
I use one of them.
Is their existence being hidden from people? I just googled "bank with highest interest rate" about a decade ago and the top result was a bank that ALSO had no fees or minimums their accounts.
I use one of them.
Is their existence being hidden from people? I just googled "bank with highest interest rate" about a decade ago and the top result was a bank that ALSO had no fees or minimums their accounts.
I don't understand. There is a near-infinite number of banks and credit unions that don't charge fees or allow over drafting.
Note that a bank not allowing overdrafts (e.g. by returning checks NSF if the account has insufficient funds for them to clear) does not guarantee that an account will never end up with a negative balance. In particular, you might deposit a check which is later returned (as NSF, or as being fraudulent) and not have enough money in your account to cover the check at the point when it is returned -- hence Patrick's point that checking accounts require the bank to extend credit even if the only thing you ever do is deposit checks.
Note that a bank not allowing overdrafts (e.g. by returning checks NSF if the account has insufficient funds for them to clear) does not guarantee that an account will never end up with a negative balance. In particular, you might deposit a check which is later returned (as NSF, or as being fraudulent) and not have enough money in your account to cover the check at the point when it is returned -- hence Patrick's point that checking accounts require the bank to extend credit even if the only thing you ever do is deposit checks.
If the only thing you ever do is deposit cheques, how can the balance go negative?
Parent has already explained, but here are the steps.
1. Deposit check 2. Funds are made available to you 3. You withdraw the funds 4. The check is later marked as fraudulent and the payer bank attempts to claw back the funds, with your account balance at zero
1. Deposit check 2. Funds are made available to you 3. You withdraw the funds 4. The check is later marked as fraudulent and the payer bank attempts to claw back the funds, with your account balance at zero
If you're withdrawing funds then it is not the case that the only thing you ever do is deposit cheques.
A bank account to which money can only be added is not a very useful one.
Reminiscent of the write-only-memory[1]
[1] https://repeater-builder.com/molotora/gontor/25120-bw.pdf
[1] https://repeater-builder.com/molotora/gontor/25120-bw.pdf
Lots and lots of people are unbanked because none of those banks and credit unions will allow them to open accounts. Largely because they all use the same data brokers to determine credit worthiness.
You generally don't need a credit report to open a checking account, but https://en.wikipedia.org/wiki/ChexSystems seems analogous.
Yes, ChexSystems is mentioned in the original blog post.
ChexSystems is the big one afaik
My understanding is that most credit unions in the US do charge NSF fees. I know I've been charged them on a savings account at a credit union that rejected an ACH transfer.
At the time, I switched to one of those high interest low fee online banks. They still charged overdraft fees, but they were lower. I had actually tired to create an account there initially, but was rejected due to lack of credit. I had to create a credit union account checking account first to establish some credit before the online bank would do business with me. Note that I'd had savings accounts at a national bank and the credit union previously, but that wasn't enough.
I just checked and my local credit union still charges for NSF, but the online bank I use does not.
At the time, I switched to one of those high interest low fee online banks. They still charged overdraft fees, but they were lower. I had actually tired to create an account there initially, but was rejected due to lack of credit. I had to create a credit union account checking account first to establish some credit before the online bank would do business with me. Note that I'd had savings accounts at a national bank and the credit union previously, but that wasn't enough.
I just checked and my local credit union still charges for NSF, but the online bank I use does not.
Their existence isn't hidden, a lot of people who don't think like me want the ability to overdraft and use it frequently.
In fact, for a few years now, overdraft is legally required to be opt-in:
https://www.fdic.gov/resources/consumers/consumer-news/2021-....
In fact, for a few years now, overdraft is legally required to be opt-in:
https://www.fdic.gov/resources/consumers/consumer-news/2021-....
[deleted]
As far as I can tell, most Americans just look at the handful of huge banks that have local retail stores: BofA, Wells Fargo, etc., and decide that somehow everyone must use one of those, and then because those highly-visible banks all charge ridiculous fees, that that's just how it is and everyone just needs to put up with it.
The existence of lots of smaller banks, credit unions, and not to mention a bunch of huge online-only banks like Ally and Schwab somehow just doesn't register.
Essentially, it's a "stupid tax".
The existence of lots of smaller banks, credit unions, and not to mention a bunch of huge online-only banks like Ally and Schwab somehow just doesn't register.
Essentially, it's a "stupid tax".
Yep. My credit union has some flat fees for wire transfers, but is otherwise basically fee-free. Their web interface is one of the worst things I've ever used, but you don't ever have to use it except to make transfers between accounts. And they have Zelle now, so you don't even need a wire transfer to send and receive money from most of the US.
They recently tried to personalize their debit cards though, which caused them to stop being accepted by some merchants, since they're no longer identified as Visa (even though they still are). I now have to use ACH transfer for certain purchases, where debit used to work just fine...
They apparently did this for tap-to-pay support, which is so not worth it because who still buys things in person? Who would want to sacrifice the ability to make online purchases for that??
They recently tried to personalize their debit cards though, which caused them to stop being accepted by some merchants, since they're no longer identified as Visa (even though they still are). I now have to use ACH transfer for certain purchases, where debit used to work just fine...
They apparently did this for tap-to-pay support, which is so not worth it because who still buys things in person? Who would want to sacrifice the ability to make online purchases for that??
Do US credit unions generally roll their own software? Or use one of a few vendors that white-label it?
Most Ontario Canada credit unions (and maybe others) just badge an internal provider's UI for their websites and online banking.
I've had worse experiences with a big bank (and Canadian banks are massive) that once forced me to update their app. Then when I went to something I used to always do, schedule a future bill payment, it just said "coming soon". Ughhhhhhh.
Most Ontario Canada credit unions (and maybe others) just badge an internal provider's UI for their websites and online banking.
I've had worse experiences with a big bank (and Canadian banks are massive) that once forced me to update their app. Then when I went to something I used to always do, schedule a future bill payment, it just said "coming soon". Ughhhhhhh.
Most credit unions (and most banks) buy their software from one of a couple “bank in a box” vendors. Fiserve is an example.
There is very little incentive for these large vendors to innovate so their software tends to feel 2 or 3 generations behind the bigger banks (or even more so the innovative credit unions).
There is very little incentive for these large vendors to innovate so their software tends to feel 2 or 3 generations behind the bigger banks (or even more so the innovative credit unions).
> Do US credit unions generally roll their own software? Or use one of a few vendors that white-label it?
I'm not sure actually. This one is a total piece of crap in terms of UX. It feels like it could easily be the subject of a TDWTF article.
For example, if you delete any messages from the "secure messaging system", it will pop up a modal dialog after they've been deleted, solely to state that the messages have been successfully deleted. These modal dialogs appear everywhere, for basically every possible reason. It is as if toasts or even notification bubbles have been intentionally avoided, in favor of these constant incessant dialogs. You can't even dismiss any of them with Esc.
Even the loading spinners are modal dialogs whenever you switch pages. And either nothing is cached, or the only way to refresh the cache is to reload the entire dashboard.
There is a fake loading screen every time you load the dashboard, just to show you ads. There's no corresponding backend request that it's waiting for the completion of, it's just a timed wait.
And they constantly run email advertising campaigns about scams and phishing that I can't unsubscribe from. (Thank Firefox Relay for letting me block these)
> Most Ontario Canada credit unions (and maybe others) just badge an internal provider's UI for their websites and online banking.
I haven't used more than a couple banks. AmEx Serve didn't have even a remotely similar UI, but I'm not sure if that's even a credit union. I might switch back to them once I have a job, since their fees are not bad, they were just nonzero which I couldn't afford back then.
> I've had worse experiences with a big bank (and Canadian banks are massive) that once forced me to update their app. Then when I went to something I used to always do, schedule a future bill payment, it just said "coming soon". Ughhhhhhh.
I usually just prefer automatic billing, but I haven't yet had to deal with rent or utilities, so that opinion may someday change. Just curious, is that an option for you, or perhaps is there a reason why you don't use it?
I'm not sure actually. This one is a total piece of crap in terms of UX. It feels like it could easily be the subject of a TDWTF article.
For example, if you delete any messages from the "secure messaging system", it will pop up a modal dialog after they've been deleted, solely to state that the messages have been successfully deleted. These modal dialogs appear everywhere, for basically every possible reason. It is as if toasts or even notification bubbles have been intentionally avoided, in favor of these constant incessant dialogs. You can't even dismiss any of them with Esc.
Even the loading spinners are modal dialogs whenever you switch pages. And either nothing is cached, or the only way to refresh the cache is to reload the entire dashboard.
There is a fake loading screen every time you load the dashboard, just to show you ads. There's no corresponding backend request that it's waiting for the completion of, it's just a timed wait.
And they constantly run email advertising campaigns about scams and phishing that I can't unsubscribe from. (Thank Firefox Relay for letting me block these)
> Most Ontario Canada credit unions (and maybe others) just badge an internal provider's UI for their websites and online banking.
I haven't used more than a couple banks. AmEx Serve didn't have even a remotely similar UI, but I'm not sure if that's even a credit union. I might switch back to them once I have a job, since their fees are not bad, they were just nonzero which I couldn't afford back then.
> I've had worse experiences with a big bank (and Canadian banks are massive) that once forced me to update their app. Then when I went to something I used to always do, schedule a future bill payment, it just said "coming soon". Ughhhhhhh.
I usually just prefer automatic billing, but I haven't yet had to deal with rent or utilities, so that opinion may someday change. Just curious, is that an option for you, or perhaps is there a reason why you don't use it?
Rationalizing different degrees of predatory banking is still being a bottom feeder. This is why USPS should become a credit union anyone can use.
I see no problem with USPS offering banking services, but remember that many check cashing service customers are themselves "predators". A lot of them are working illegally (sometimes combined with identity theft), or dodging child support payments and other debts. No legitimate bank would serve those criminals.
You're right - no legitimate bank would serve those criminals. You have to be a white-collar criminal for banks to serve you.
I mean it used to be, pretty successfully. https://en.m.wikipedia.org/wiki/United_States_Postal_Savings...
(non-american here)
Huh? Why? Isn't the USPS a mail company? I don't get what that has to do with banking.
Huh? Why? Isn't the USPS a mail company? I don't get what that has to do with banking.
It's fairly common for postal systems to provide basic banking services: https://en.wikipedia.org/wiki/Postal_savings_system
Because there are branches everywhere in the US making access easy whether you’re in New York or Montana.
There’s no other department of the federal government with that coverage.
They also are quasi financial already as you can get a USPS money order.
There’s no other department of the federal government with that coverage.
They also are quasi financial already as you can get a USPS money order.
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The USPS is a government agency that already has physical branches in almost every community in the US, which would make it an extremely accessible bank for the 4.5% or so of households who currently don't have a bank.
It could also be pressure on American banks to treat their customers better, since the USPS is not burdened with a responsibility to generate dividends for shareholders.
The USPS is also not directly funded by taxes (though it is indirectly subsidized via it's tax status and sole right of access to mailboxes), and with the waning popularity of letter mail, would become more self sufficient in the long term if it branched out into other services
Other countries also combine banking and postal branches for similar reasons, like Japan (although it is in the process of being privatized).
It could also be pressure on American banks to treat their customers better, since the USPS is not burdened with a responsibility to generate dividends for shareholders.
The USPS is also not directly funded by taxes (though it is indirectly subsidized via it's tax status and sole right of access to mailboxes), and with the waning popularity of letter mail, would become more self sufficient in the long term if it branched out into other services
Other countries also combine banking and postal branches for similar reasons, like Japan (although it is in the process of being privatized).
I guess you haven't traveled much. Post offices in other countries also provide fundamental banking services. Right now, one can get money orders from USPS.
USPS isn't a company, it's a government department which provides a public service (deliver mail at very low prices). Because the USPS has so many branches all over the country, many people (myself included) think it would be a good idea to also offer banking services and so that the unbanked can become banked. Even just a basic checking account would mean people don't have to pay check-cashing fees anymore.
You don't need branches all over the country to be a bank. They're only really useful if you want to deposit cash.
Japan offers banking at the post office. Not sure what the tradeoffs are vs their commercial banks
AFAICT/R, JP Post banking used to be really barebones, even for late 2010s Japan. No credit cards/debit cards, not a lot of financial products, etc. In recent years it seems like they have added a credit card and a debit card and online banking as well.
On the flipside, they are one of the most ubiquitous ATMs in Japan and your local post office will double as a branch for JP Post Bank (which are everywhere).
Oh and it's nation wide too! Which is kind of important for a country where some banks restrict activities and branches to their direct locality.
Man. I wish patio11 would talk about Japanese banking more because to most American audiences that system is also just, completely something else.
On the flipside, they are one of the most ubiquitous ATMs in Japan and your local post office will double as a branch for JP Post Bank (which are everywhere).
Oh and it's nation wide too! Which is kind of important for a country where some banks restrict activities and branches to their direct locality.
Man. I wish patio11 would talk about Japanese banking more because to most American audiences that system is also just, completely something else.
I mean in UK Royal Mail offers banking services, as does Poczta Polska in Poland - it's not that weird?
Banking services for other banks or do they issue accounts?
Royal Mail uses someone else for their underlying banking infrastructure, but Poczta Polska definitely runs all banking services themselves.
This is more about how it used to work. Now, there's a whole industry devoted to getting in between employers and employees and siphoning off fees.
First, there's the "pay by depositing to a debit card" racket.[1] "The biggest issue is the hidden fees. Some providers charge cardholders for common activities such as receiving paper statements, over-drafting, replacing cards, transferring money to another account, making withdrawals at most ATMs, and even not using the card for a period of time."
Then, there are things such as DailyPay.[2] This combines payroll, a debit card, and payday loans into one convenient fee-laden package.[3] Worse, not getting paid means trying to reach the intermediary's customer support.
[1] https://www.thebalancemoney.com/what-are-payroll-debit-cards...
[2] https://www.dailypay.com/
[3] https://www.needhelppayingbills.com/html/daily_pay_services....
First, there's the "pay by depositing to a debit card" racket.[1] "The biggest issue is the hidden fees. Some providers charge cardholders for common activities such as receiving paper statements, over-drafting, replacing cards, transferring money to another account, making withdrawals at most ATMs, and even not using the card for a period of time."
Then, there are things such as DailyPay.[2] This combines payroll, a debit card, and payday loans into one convenient fee-laden package.[3] Worse, not getting paid means trying to reach the intermediary's customer support.
[1] https://www.thebalancemoney.com/what-are-payroll-debit-cards...
[2] https://www.dailypay.com/
[3] https://www.needhelppayingbills.com/html/daily_pay_services....
One thing I like about Canada is that you can take any federal government cheque into any bank branch with ID and by law they have to cash it for you for free.
Account or not.
Account or not.
Never heard of this so I looked it up [0]. I was a poor student working for the federal government and always had hold periods on physical paycheques deposited in person. Once or twice it was a hassle. I guess one would have to know their rights and be prepared to assert them.
[0] https://www.canada.ca/en/financial-consumer-agency/services/...
[0] https://www.canada.ca/en/financial-consumer-agency/services/...
Business should not pay by check - only in America is this technical debt so prevalent. Cash or payment into bank account please
I have been working since 1996 and never been paid by cheque. I find cheques very annoying to deal with. Usually get them on some edge case like a government refund but it has been years since that even. The other rare case is a bank cheque for a deposit for buying a house etc. Although I bet that is rare now just do an instant bank transfer.
I do vaguely remember the 80s and there was a fair bit of cheque usage along with those credit card duplicator things where the sales person takes an imprint of the card. Wild times!
I do vaguely remember the 80s and there was a fair bit of cheque usage along with those credit card duplicator things where the sales person takes an imprint of the card. Wild times!
What if the business doesn't know your bank account prior to payment and neither of you want them to know it?
(Imagine a business that occasionally mails random people $10.48 without asking them first.)
(Imagine a business that occasionally mails random people $10.48 without asking them first.)
Patrick's stuff is so good. I find myself rereading his old posts when I'm bored, just to pick up on details I didn't remember from the first time I read it.
He's kind of wordy, and comes off as a bit self-important, but yeah I do read most of his stuff.
Wordy? Self-important? That’s a lot of writing online these days.
> "If you use “kind girl behind the counter” language about the 0.01% most aggravating customer once, you will not be a bank teller tomorrow. So bank tellers basically never use those words, and instead can inflect “Can I help you, sir?” in a way which leaves absolutely no doubt as to how welcome the new arrival to the branch is."
I found myself nodding along to a lot of the contents of this article, but I totally disagree with this part... it runs totally counter to my experience. To be fair, maybe my experience was the exception that proves the rule (or maybe things have changed since I worked front-line at a financial institution), but the expectation that you would be cold or unwelcoming to a customer (or prospective customer) based on class or perceived class was absolutely not the case. Like, I cannot stress that enough. Don't get me wrong, there were procedural safeguards such as "no checking account if you have <650 FICO", but you were expected to be welcoming to everyone who walked in the door and "they seemed poor" would certainly not be an acceptable excuse for snubbing a customer.
I found myself nodding along to a lot of the contents of this article, but I totally disagree with this part... it runs totally counter to my experience. To be fair, maybe my experience was the exception that proves the rule (or maybe things have changed since I worked front-line at a financial institution), but the expectation that you would be cold or unwelcoming to a customer (or prospective customer) based on class or perceived class was absolutely not the case. Like, I cannot stress that enough. Don't get me wrong, there were procedural safeguards such as "no checking account if you have <650 FICO", but you were expected to be welcoming to everyone who walked in the door and "they seemed poor" would certainly not be an acceptable excuse for snubbing a customer.
The point isn't to directly "snub" the customer, but to talk to them in a formal, professional, superficially polite way that the kind of customer you don't want does not find welcoming, because in their normal life they do not encounter it.
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> And so by presenting your check, which you think is substantially terminating a transaction, you are actually creating a new credit extension with your bank. They are extremely aware that you just asked them to advance you money, even if you are not aware that you did that. They already partially underwrote this extension of credit; that is why you were not shooed out of the building when you originally asked for a checking account.
I'm extremely confused about the usage of the word "need", and the implication that this need for the line of credit is what generates all these downstream problems.
The person depositing a check wants the money soon, sure. And the check bouncing or not depends on the person writing the check. The person depositing the check "should" "just wait"? Like don't extend the credit? Credit card processors hold onto your money for this exact sort of reason!
Yes, there are trust considerations. But don't move money that is not quasi-guaranteed? Pay for money flow? Make the trust relationship between banks and not between atomic actors? Risks are risks are risks but saying that people should be unbanked because their checks will bounce... I guess it's weird to have these pieces of paper have so much trust associated to them in the first place?
Maybe the check network doesn't work as well in this model. Fraud is a whole thing as well of course. I guess in this model people trust checks enough to allow groceries to be paid by check. Just feels extremely suboptimal.
I'm extremely confused about the usage of the word "need", and the implication that this need for the line of credit is what generates all these downstream problems.
The person depositing a check wants the money soon, sure. And the check bouncing or not depends on the person writing the check. The person depositing the check "should" "just wait"? Like don't extend the credit? Credit card processors hold onto your money for this exact sort of reason!
Yes, there are trust considerations. But don't move money that is not quasi-guaranteed? Pay for money flow? Make the trust relationship between banks and not between atomic actors? Risks are risks are risks but saying that people should be unbanked because their checks will bounce... I guess it's weird to have these pieces of paper have so much trust associated to them in the first place?
Maybe the check network doesn't work as well in this model. Fraud is a whole thing as well of course. I guess in this model people trust checks enough to allow groceries to be paid by check. Just feels extremely suboptimal.
You can ask the bank to hold the funds until final clearance - which can be quite long. Weeks or more.
Often if you really need to do that, you’re better off taking the check the bank it was drawn on, often having to open an account there first. Still can take quite awhile.
But before computers and electric communication, this was the best and fastest way, and since the vast majority of transactions are legitimate, it works.
Pratchett’s Going Postal is a decent look at the system.
Often if you really need to do that, you’re better off taking the check the bank it was drawn on, often having to open an account there first. Still can take quite awhile.
But before computers and electric communication, this was the best and fastest way, and since the vast majority of transactions are legitimate, it works.
Pratchett’s Going Postal is a decent look at the system.
Checks clear within days, and it doesn’t take more than week for check to be returned and verified for authenticity.
There is no “final clearance”. The owner of account can notice fraudulent check and report it months later, and it gets reversed.
There is no “final clearance”. The owner of account can notice fraudulent check and report it months later, and it gets reversed.
A bank can’t require you to open an account to cash a check from that bank
No - but they can imply that you should, and if you don’t make cashing the check more onerous opening an account.
I had this happen to me 25 years ago with Wells Fargo. I was on vacation and had a check drawn on the branch I was standing in front of - and foolishly thought it easier to cash it right the and there than wait to get home and deposit it. Boy was I wrong.
I’d also done this once or twice as an actual child in the early 90s and then it was not a problem.
I had this happen to me 25 years ago with Wells Fargo. I was on vacation and had a check drawn on the branch I was standing in front of - and foolishly thought it easier to cash it right the and there than wait to get home and deposit it. Boy was I wrong.
I’d also done this once or twice as an actual child in the early 90s and then it was not a problem.
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The word "need" does not appear in the quote :') I think the author is just describing how it typically works rather than how it needs to work.
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The default in the USA is 180 days to void a check (some have 60 or 90 day voids).
Would you bank somewhere that held your payroll deposit for 6 months?
Would you bank somewhere that held your payroll deposit for 6 months?
I think the way patio11 writes about poor people comes off more classist than if he just called them shiftless criminals instead of repeatedly being extremely overtly nice about them while also saying they can't do anything right, can't interact with any bureaucracy successfully and don't know how to cook.
Besides that, I don't think they actually eat at McDonald's much. Their relationship with fast food is that they work there.
Besides that, I don't think they actually eat at McDonald's much. Their relationship with fast food is that they work there.
The people using these check cashing services often have someone taking money out of their bank account — hence why they don’t/can’t use one.
... in america.
It has always confused me how simultaneously the US money system is operating in the most advanced interconnected economy imaginable which fosters innovation (bankruptcy laws in the US are designed to make it easy to try again, they encourage entrepreneurship) and yet.. the whole credit union, banking crash, over inflated economy has made them retain unbelievably archaic approaches to money on paper.
Checking for forgery, active forgery presumably underway, 3+ day clearing, "you're not from round here" risks, It's just insane.
Go to walmart, buy a stored value card, you can do dollar events with zero friction but present a cheque at the counter, and you're in the slow path.
It's positively ... Indian. It's like mainstream Indian bureaucracy levels of insane slowness. It's even had films with Whoopi Goldberg made about it (she is a cheque processor in some movie, doing it by hand at a 1970s vintage cheque processing machine. I think its "made in america" with Ted Danson)
It has always confused me how simultaneously the US money system is operating in the most advanced interconnected economy imaginable which fosters innovation (bankruptcy laws in the US are designed to make it easy to try again, they encourage entrepreneurship) and yet.. the whole credit union, banking crash, over inflated economy has made them retain unbelievably archaic approaches to money on paper.
Checking for forgery, active forgery presumably underway, 3+ day clearing, "you're not from round here" risks, It's just insane.
Go to walmart, buy a stored value card, you can do dollar events with zero friction but present a cheque at the counter, and you're in the slow path.
It's positively ... Indian. It's like mainstream Indian bureaucracy levels of insane slowness. It's even had films with Whoopi Goldberg made about it (she is a cheque processor in some movie, doing it by hand at a 1970s vintage cheque processing machine. I think its "made in america" with Ted Danson)
A thing I try to keep as a through line in discussing legacy infrastructure, and checks in the U.S. are definitely legacy infrastructure, is both a) how we ended up here despite later-generation systems getting to leapfrog off what earlier-ones learned and b) why people still use wlog checks instead of going with other methods that they could also choose to use, in 2024.
For example, in this issue, a major reason why some people don't do value transfer through banks directly is the banks don't really like them (for reasons), the feeling is mutual (for reasons), and other people who do not have the same POV re: banks want to give those people money in a scaled fashion, which (unless they orient their operations around a solution) will frequently involve sending out checks.
For example, in this issue, a major reason why some people don't do value transfer through banks directly is the banks don't really like them (for reasons), the feeling is mutual (for reasons), and other people who do not have the same POV re: banks want to give those people money in a scaled fashion, which (unless they orient their operations around a solution) will frequently involve sending out checks.
"for reasons" is doing all the heavy lifting here. I think the whole point of this series is to lift the tablecloth a bit and look at the dust bunnies underneath.
He does that. He's simply eliding the explanation in his comment here, because he explained both of those things in the article. The "reasons" he elided are:
* Banks don't want to do business with these particular people because they know them to be a bad business risk. They often know, via credit reporting methods, that the specific individual human standing before them has a history of cashing bad checks/committing fraud/whatever it is. Therefore, they decline to work with that person.
* The people who are bad risks for banks get rather tired of dealing with banks, both because constant rejection is tiresome and because bank employees make it very clear (though unspoken explicitly) that they are persona non grata there. By contrast, the people at the check cashing shop treat them better, so they would rather take their financial business there.
I get why you want the explanations and not just "for reasons", but both of these points are quite clearly spelled out in the article. So I don't really think the author deserves the grief you're giving him in this case.
* Banks don't want to do business with these particular people because they know them to be a bad business risk. They often know, via credit reporting methods, that the specific individual human standing before them has a history of cashing bad checks/committing fraud/whatever it is. Therefore, they decline to work with that person.
* The people who are bad risks for banks get rather tired of dealing with banks, both because constant rejection is tiresome and because bank employees make it very clear (though unspoken explicitly) that they are persona non grata there. By contrast, the people at the check cashing shop treat them better, so they would rather take their financial business there.
I get why you want the explanations and not just "for reasons", but both of these points are quite clearly spelled out in the article. So I don't really think the author deserves the grief you're giving him in this case.
>They often know, via credit reporting methods, that the specific individual human standing before them has a history of cashing bad checks/committing fraud/whatever it is.
This wouldn't even be an issue if America didn't still rely on the utterly archaic check scheme for transferring money.
This wouldn't even be an issue if America didn't still rely on the utterly archaic check scheme for transferring money.
> This wouldn't even be an issue if America didn't still rely on the utterly archaic check scheme for transferring money.
It still will be for as long as many people cannot get and maintain a free bank account that is usable for transferring funds via whatever scheme you envision replacing checks. And the property that checks have, namely that some percentage of them get unwound for various reasons and that percentage varies substantially by customer, is very hard to get rid of. As long as that property exists, access to a bank account that provides that mechanism will be an extension of credit and thus not universally available.
It's possible that a system for instant payment clearance, like FedNow, might reduce the problem of insufficient funds and similar clearance issues. However, that doesn't eliminate the possibility of bad/fraudulent/etc checks, just reduce it.
It still will be for as long as many people cannot get and maintain a free bank account that is usable for transferring funds via whatever scheme you envision replacing checks. And the property that checks have, namely that some percentage of them get unwound for various reasons and that percentage varies substantially by customer, is very hard to get rid of. As long as that property exists, access to a bank account that provides that mechanism will be an extension of credit and thus not universally available.
It's possible that a system for instant payment clearance, like FedNow, might reduce the problem of insufficient funds and similar clearance issues. However, that doesn't eliminate the possibility of bad/fraudulent/etc checks, just reduce it.
>whatever scheme you envision replacing checks.
You're acting like this is some kind of futuristic concept. Are you not aware that everyone in every other country manages just fine without checks? They're only used in the US. If I went to my bank now and asked them about "cashing a check", they'd probably look at me like I had two heads. They simply don't exist.
You're acting like this is some kind of futuristic concept. Are you not aware that everyone in every other country manages just fine without checks? They're only used in the US. If I went to my bank now and asked them about "cashing a check", they'd probably look at me like I had two heads. They simply don't exist.
> You're acting like this is some kind of futuristic concept.
No, I'm not. I'm well aware of how other countries operate, as well as proposals for upcoming systems in the US.
I'm observing that the article we're currently discussing talks about multiple sources of issues with checks, and immediate-clearing electronic systems solve some but not all of them.
Immediate clearing systems eliminate NSF issues: a check will never bounce, it'll get cleared immediately or rejected immediately. This is a great thing and I'm looking forward to it. It'll be a massive reduction in fees and hassle for many people.
Immediate clearing systems do not eliminate the problem of the purported originator of the check disputing/rejecting/etc the check payment and the originating bank clawing back the payment. There are any number of reasons for that, some of them legitimate. The article mentions some of them, and there are more.
I am not making an argument against immediate clearing systems; on the contrary, I think they're an incredible good idea. I'm observing that they are not, in fact, a panacea that on its own will completely eliminate the reasons why people are unbanked or underbanked.
No, I'm not. I'm well aware of how other countries operate, as well as proposals for upcoming systems in the US.
I'm observing that the article we're currently discussing talks about multiple sources of issues with checks, and immediate-clearing electronic systems solve some but not all of them.
Immediate clearing systems eliminate NSF issues: a check will never bounce, it'll get cleared immediately or rejected immediately. This is a great thing and I'm looking forward to it. It'll be a massive reduction in fees and hassle for many people.
Immediate clearing systems do not eliminate the problem of the purported originator of the check disputing/rejecting/etc the check payment and the originating bank clawing back the payment. There are any number of reasons for that, some of them legitimate. The article mentions some of them, and there are more.
I am not making an argument against immediate clearing systems; on the contrary, I think they're an incredible good idea. I'm observing that they are not, in fact, a panacea that on its own will completely eliminate the reasons why people are unbanked or underbanked.
Oh, your bank knows about cashing American cheques (or British or I think French ones, though they're much less common). It's on their table of fees, and costs €20.
I would never accept to be paid by an American cheque because it will take months to get the money.
Oh, why? Because they actually wait for it to clear. Zero fraud then.
In the US you seem to like living with options for fraud.
Oh, why? Because they actually wait for it to clear. Zero fraud then.
In the US you seem to like living with options for fraud.
Less fraud, not zero fraud.
Even if your bank sends the cheque for collection and waits for the payor bank to confirm there’s funds there.
The cheque could have been stolen and forged, or a legitimate cheque could have been altered. There’s even an example up-thread of a bank recycling account numbers. The owner of the bank account it’s drawn against can take weeks or months to notice that the fraud has happened, and when they do the transaction can be unwound leaving your bank liable to return the value of the cheque.
When I used to deposit US cheques regularly in the UK, I’d be offered the choice between “negotiation” (we assume the cheque is good and will pay it this week) and “collection” (we’ll send the cheque back to the US and only pay you when we collect the money weeks later), but in both cases there was language on the form making it clear that they could pull the money back up to years later if something went wrong.
There’s literally no way of implementing cheques—-or most other payment rails—-without someone, somewhere choosing to extend credit and deciding to take on that risk.
Even if your bank sends the cheque for collection and waits for the payor bank to confirm there’s funds there.
The cheque could have been stolen and forged, or a legitimate cheque could have been altered. There’s even an example up-thread of a bank recycling account numbers. The owner of the bank account it’s drawn against can take weeks or months to notice that the fraud has happened, and when they do the transaction can be unwound leaving your bank liable to return the value of the cheque.
When I used to deposit US cheques regularly in the UK, I’d be offered the choice between “negotiation” (we assume the cheque is good and will pay it this week) and “collection” (we’ll send the cheque back to the US and only pay you when we collect the money weeks later), but in both cases there was language on the form making it clear that they could pull the money back up to years later if something went wrong.
There’s literally no way of implementing cheques—-or most other payment rails—-without someone, somewhere choosing to extend credit and deciding to take on that risk.
Maybe. I've never taken one and only one client ever asked me if i can take one.
Tbh I think you can still pay by (local) cheque even here but you need to go to the bank and sign something in blood to get them. And not sure if anyone actually takes them any more.
They may have been used for B2B with 30-60-90 day payment terms 15-20 years ago.
Tbh I think you can still pay by (local) cheque even here but you need to go to the bank and sign something in blood to get them. And not sure if anyone actually takes them any more.
They may have been used for B2B with 30-60-90 day payment terms 15-20 years ago.
Just in case you didn't notice: patio11, author of the comment you're replying to, is also the author behind BitsAboutMoney, the source of this article/series.
Thank you I did not realise. But, noting that I don't think it alters the intent of my comment much. For reasons
Heh, I didn’t notice it was him but when scanning through the comment noticed the “(for reasons)” and was wondering if that was some subcultural or regional dialect that so perfectly mimicked patio11.
But the dust bunnies are with cheques. There is no bounce risk with a bank transfer. There is no identity risk. The money goes or it doesn’t. There is fraud risk, money laundering and terrorism etc. “risk” (airquotes because, HSBC)
But most of the shit it is gone with a bank transfer.
The problem is poor people would need to pay for their bank (as banks need to make money other ways and from the middle class that will be credit cards and mortgages etc.)
The problem is poor people would need to pay for their bank (as banks need to make money other ways and from the middle class that will be credit cards and mortgages etc.)
The banks didn’t do themselves any favors with Zelle either. All they had to do was make a nice copy of paypal/venmo/cashapp/etc but they inexplicably did not, and now we have the meme that Zelle is mostly fraud. In my experience the implementations are horrific and don’t integrate with anything else my bank is doing so I do t feel comfortable pushing people to use it rather than paypal or venmo.
As a payment method approaches irreversibility it attracts more and more fraud.
The main thing Zelle gives us normal plebs is the ability to pay via routing numbers to businesses without incurring fees.
Possible before, easy now.
The main thing Zelle gives us normal plebs is the ability to pay via routing numbers to businesses without incurring fees.
Possible before, easy now.
> why people still use wlog [?] checks instead of going with other methods that they could also choose to use, in 2024.
Anecdotally, I wrote a check to my landlord yesterday, because a few months back they claimed they never got the automatic bill-pay from my bank, and my bank said it was already sent, and weeks later my bank said the recipient refused to take it... Anyway, no party was ever able to tell me why an automated process that worked unattended for months suddenly stopped working for no discernible reason.
Anecdotally, I wrote a check to my landlord yesterday, because a few months back they claimed they never got the automatic bill-pay from my bank, and my bank said it was already sent, and weeks later my bank said the recipient refused to take it... Anyway, no party was ever able to tell me why an automated process that worked unattended for months suddenly stopped working for no discernible reason.
“Gremlins.”
All financial infrastructure is a patched-together collection of systems spread across multiple different firms made of multiple suborgs with vastly different levels of observability into and understanding of their local part of the total system. For many routine problems, the cost of having a rigorous answer to “What just happened?” is far, far greater than the dollar amount at stake in the transaction. You’d need the equivalent of a federal agency doing an after-accident investigation to make headway, at the cost of millions.
So we chalk it up to gremlins and move on, for better or worse. (This is one reason why financial institutions have an operational losses budget. Sometimes the gremlins eat someone’s money. So you just charge it to Ops Losses and move on.)
All financial infrastructure is a patched-together collection of systems spread across multiple different firms made of multiple suborgs with vastly different levels of observability into and understanding of their local part of the total system. For many routine problems, the cost of having a rigorous answer to “What just happened?” is far, far greater than the dollar amount at stake in the transaction. You’d need the equivalent of a federal agency doing an after-accident investigation to make headway, at the cost of millions.
So we chalk it up to gremlins and move on, for better or worse. (This is one reason why financial institutions have an operational losses budget. Sometimes the gremlins eat someone’s money. So you just charge it to Ops Losses and move on.)
I write checks to my handyman, because he takes either check or Venmo. And Venmo refuses to validate my bank account. I never see the test deposit show up, and on the Venmo side it just says "try again later". So, checks it is. Say what you will about writing checks, but they are reliable in a way that digital payments aren't.
WLOG means "without loss of generality". Originally from mathematics; a proof by division into cases may say something like "assume, without loss of generality, that X is even ..."; WLOG flags a statement that applies just as well to other cases with obvious analogous changes. As generalized to non-mathematical writing, WLOG means "I could make an obvious analogous statement here about similar things for similar reasons".
Bill pay adds several middlemen. Before there was each party’s bank and the postal service. Now there’s the bank’s bill pay department which is sometimes contracted out. The actual printing and mailing of the check is usually contracted out. The bill pay service sometimes tries to be smart about binding an address to a name and sometimes autocorrects to the wrong address. Finally checks always have human error on the part of the two meat bags that are the payer and payee (threw out envelope or let it fall off their table and under a couch).
Bill Pay systems just mail checks?
That's the last-ditch method for making sure they can pay anyone. My bank lets me pay anyone via online bill pay, some of whom have registered with the bank in a manner that allows fast transfers, and some of whom get mailed a check that may take up to 5 days to arrive.
That's usually the fallback method in case they can't find some way to do an electronic transfer.
For a lot of people, the occasional check works pretty well. My housekeeper comes next week. I'll leave a check for her. I'll stick the occasional check in an envelope, but mostly I just fill in some bill pay numbers with my bank and it's transparent to me if it's ACH or a check is mailed. It's just not a problem for me or for the people receiving.
Of course, I don't try to pay by check in a store. (Though I did write about a $30K check when I bought my last car and that wasn't a problem either--assume they have back-end systems to verify.) Getting rid of checks just isn't a problem I care about or want to devote any mental bandwidth to.
Of course, I don't try to pay by check in a store. (Though I did write about a $30K check when I bought my last car and that wasn't a problem either--assume they have back-end systems to verify.) Getting rid of checks just isn't a problem I care about or want to devote any mental bandwidth to.
They don’t even really verify that much (they were willing to hand over the car on a post-dated check) because they know where you are and where the car will be.
I presume they do some basic checks, but it’s really all down to trusting it’ll all come out eventually.
They’d much rather have a check than 30k in hundreds.
I presume they do some basic checks, but it’s really all down to trusting it’ll all come out eventually.
They’d much rather have a check than 30k in hundreds.
You used to have to run to the bank and get a cashier's check. I assume there are other verifications these days.
Meanwhile, I can pay the ice cream vendor in Copacabana Beach using pix and the transaction is confirmed on their device before I even lift my finger from the screen.
Why do you think we don't have instant money transfer available in the US, just because in a pinch we can still write a check? These days a check is just a paper form of digital payment anyway, my bank never touches the actual checks that I receive.
I'm fine with using whatever electronic transaction mechanism but a fair number of service people are not set up that way and I'm fine with just handing them a check.
So? This is also possible in the US, I don't see the connection between the 2 examples.
Is it really? How fast does it settle? Does it require an extra app and extra account? Is it guaranteed to be supported by any bank? Does it charge fees? Is it widely used and trusted by people?
Seriously, I don't think people in this thread appreciate just how practical and efficient pix is. Adoption is essentially universal across the population, and we are talking about a poor country.
Seriously, I don't think people in this thread appreciate just how practical and efficient pix is. Adoption is essentially universal across the population, and we are talking about a poor country.
Yes? You can make transfers without an extra app or extra account that settle relatively "instantly" whether or not the banks have actually reconciled (as TFA alludes it's basically always some sort of credit). And this is true of many countries in the world, too! And many of those countries still use and support checks.
There are a variety of systems in many countries, the key difference with Pix is that it is very modern and relatively mobile-first. There are not many other such systems in the world yet. How easy is it to pay without a phone? Or without internet? I regularly make payments in places where there is nearly zero cell signal.
Pix charges fees, too, to merchants.
Is Pix guaranteed to be supported by every bank? The mandate certainly doesn't seem to require it, but I'll take your word.
I think the reason that people in this thread don't appear to "appreciate just how practical and efficient pix is" is simply because it's not very relevant. Sending and receiving money isn't particularly annoying in the US. Nor is accepting payments (merchant fees aside -- that's a whole different topic that I am sure patio11 has explored). I am sure that if Pix or something like it was widely available in the US, folks would be singing its praise too. But it's not particularly compelling when most people aren't even aware that something is or could be lacking in the current system.
There are a variety of systems in many countries, the key difference with Pix is that it is very modern and relatively mobile-first. There are not many other such systems in the world yet. How easy is it to pay without a phone? Or without internet? I regularly make payments in places where there is nearly zero cell signal.
Pix charges fees, too, to merchants.
Is Pix guaranteed to be supported by every bank? The mandate certainly doesn't seem to require it, but I'll take your word.
I think the reason that people in this thread don't appear to "appreciate just how practical and efficient pix is" is simply because it's not very relevant. Sending and receiving money isn't particularly annoying in the US. Nor is accepting payments (merchant fees aside -- that's a whole different topic that I am sure patio11 has explored). I am sure that if Pix or something like it was widely available in the US, folks would be singing its praise too. But it's not particularly compelling when most people aren't even aware that something is or could be lacking in the current system.
What app do you recommend? The most common one is Venmo, but people don't realize it doesn't settle for a number of days after the transaction.
So you just said you like writing cheques to make other people wear the 3 day clearing delay and paperwork hassle and you don't use them yourself when you are a consumer.
You don't care because you're an issuer, and a net beneficiary of retention of the funds in your control for those extra days of clearing.
You don't care because you're an issuer, and a net beneficiary of retention of the funds in your control for those extra days of clearing.
Even as a receiver of checks, I don't care. It's easier to deposit than cash or PayPal. Zelle is nicer, but if I can't wait three days for the money, I already messed up in my financial management.
As the article describes, it may be convenient for you, but for many people it's inconvenient and costly to cash a check.
Also, saying that those people messed up in their financial management is sort of blaming their poverty on them, while we can't know (in general) whether that's their fault or not.
Also, saying that those people messed up in their financial management is sort of blaming their poverty on them, while we can't know (in general) whether that's their fault or not.
If I'm paying them in person and a check is a problem I expect them to tell me and I'll pay them in cash is that's reasonable such as for already-completed work. But I'm not mailing cash or diddling around with other random payment mechanisms.
Nobody is asking you, specifically, to do anything. But your original point was that checks aren't a problem for you. My point is just that as the article describes, for those without a bank account it does pose problems, and so assuming you do have a bank account, "worksforme" is not a very substantive comment, since the article also already acknowledges that.
So paying in cash seems the most straightforward mechanism in that case. Which is fine in-person if checks don't work for some reason.
Sure, I use them myself as a consumer. Not frequently but I get refund checks etc. for various reasons. They take a minute to deposit with my banking app. Would I want to go back to doing bills every week with checks and mailing them? Of course not. But dealing with one now and then just isn't a problem.And for the generally small amounts involved, a few days of clearing generally just doesn't matter.
> make other people wear the 3 day clearing delay
This is only applicable to the unbanked, for the most part. Regular banks make funds immediately available when a check is deposited. Unless you're already on their radar for kiting.
This is only applicable to the unbanked, for the most part. Regular banks make funds immediately available when a check is deposited. Unless you're already on their radar for kiting.
In situations like this, where it's me and a small business, I very explicitly ask how the recipient would like to be paid.
I've never been told cash, but if I was, I would be happy to pay in cash.
I've never been told cash, but if I was, I would be happy to pay in cash.
I have rarely had individuals who want to get paid in cash (off the books). But although some businesses like my furnace company are slowly switching over to having portable terminals, in my experience, checks are still the default around where I live in the US for service people and the like. (And, as I wrote elsewhere, even things like local tax payments can have outsourced third-party websites which charge a fee so it can be materially cheaper to pay by check.)
> It's positively ... Indian. It's like mainstream Indian bureaucracy levels of insane slowness.
Ironically India has a very significant amount of transactions cashless/electronic, pushed by demonetization and later covid. The government has been pushing hard for it for a while and I think they succeeded.
Ironically India has a very significant amount of transactions cashless/electronic, pushed by demonetization and later covid. The government has been pushing hard for it for a while and I think they succeeded.
Yes. My comparison was to the wider indian paperwork processes, not money, where India is stellar.
Uruguay is another economy which has gone all-in on cashless, shops and cafes had to offer 10% discount for card transactions when I was there 8 years ago, the idea was to beat out the tax-avoidance.
Uruguay is another economy which has gone all-in on cashless, shops and cafes had to offer 10% discount for card transactions when I was there 8 years ago, the idea was to beat out the tax-avoidance.
> It has always confused me
When this feeling occurs, why is the next step "wow the US sucks" instead of "there must be some good reason that I don't understand."
When this feeling occurs, why is the next step "wow the US sucks" instead of "there must be some good reason that I don't understand."
It can be all of the above! Usually, however, it’s that we started a system earlier, or it has survived longer, for any number of various reasons, and has never needed to be fully replaced.
Same way that a country that never had anything before now won’t run copper telephone wires, and instead go directly to fiber backboned wireless.
Same way that a country that never had anything before now won’t run copper telephone wires, and instead go directly to fiber backboned wireless.
[deleted]
So what do you think is the positive reason for US exceptionalism here?
As opposed to European exceptionalism that assumes that whatever is done in Europe is not only standard but also better?
I what way shape or form can settling money over several days be better than instant transfers with direct auth?
You can do that too! It's just that you can also use checks. I don't see the problem, instant money transfers are ubiquitous and were easy for me even as a visitor in the US. The fact that bank transferts take longer doesn't really matter day to day, they just don't use them for that
Just to be clear, I live in Australia and we also have 3 day cheque clearing but the banks and government are closing out on cheque processes and almost everything now is payid which is instant settlement. From what little I read it's more reliable than venmo.
the experience of being in other countries
Because the reasons that are there aren't good; most of the other countries had a similar situation but switched decades ago.
> insane slowness
slowness is a feature, not a bug, in some social situations. Most modern Americans have not experienced that kind of situation. One of the elements missing here is control - who has control over the transaction, and what are the practical methods to resolve dispute.
Cash is not great at scale perhaps, but it is great for the individual in times when trust is gone, where there is unequal power relationship, and where there is real corruption inserted into ordinary transactions.
As an American with some knowledge of history, I support cash, paper checks, and electronic transfer. without a doubt.
slowness is a feature, not a bug, in some social situations. Most modern Americans have not experienced that kind of situation. One of the elements missing here is control - who has control over the transaction, and what are the practical methods to resolve dispute.
Cash is not great at scale perhaps, but it is great for the individual in times when trust is gone, where there is unequal power relationship, and where there is real corruption inserted into ordinary transactions.
As an American with some knowledge of history, I support cash, paper checks, and electronic transfer. without a doubt.
A thing about cash, though, is that another problem with precisely those occasions when "trust is gone, where there is unequal power relationship" is that cash can be forcibly taken away from you.
At every scale from muggings to home robbery to retail store robberies up to bank robbery and knocking over armored cars, cash handling imposes a security and risk management burden, with a particular component of risk of physical violence that is much less of a factor in electronic security risk models..
At every scale from muggings to home robbery to retail store robberies up to bank robbery and knocking over armored cars, cash handling imposes a security and risk management burden, with a particular component of risk of physical violence that is much less of a factor in electronic security risk models..
of course this is true - physical security is already something I take responsibility for.. it seems strange that this is really an issue in a civilized place. Is this more like a feeling of fear?
I may be missing your point but it seems to me that cash and paper checks are at opposite ends of the spectrum wrt who has most control over the outcome in case of disputes: with cash, the payer has to go to court to get their money back; with checks, the payer can just refuse to pay and the payee would have to go to court to get their money.
Or perhaps you're saying which one to use depends on what you want? But if there's an unequal power relationship, the person with more power (probably the payer) will usually choose. So to fix that, it's not enough for cash to be an option, checks need to not be an option. (Electronic transfers can be an option, as long as they're set up so that the payer can't unilaterally take the money back.)
Or perhaps you're saying which one to use depends on what you want? But if there's an unequal power relationship, the person with more power (probably the payer) will usually choose. So to fix that, it's not enough for cash to be an option, checks need to not be an option. (Electronic transfers can be an option, as long as they're set up so that the payer can't unilaterally take the money back.)
this is a very old topic and also a very current, present day one.. Solutions exist that may not seem obvious in the modern context, because the world you and I live in, is so different than the past.
In my own experience I have negotiated sales or contracts with others for non-trivial sums. It feels like most modern people are just going along with systems that require an intermediary and working devices. I feel it is not only important, but crucial, to have the ability to negotiate directly with a peer or others. That means without electricity or cell phone coverage, too. YMMV
In my own experience I have negotiated sales or contracts with others for non-trivial sums. It feels like most modern people are just going along with systems that require an intermediary and working devices. I feel it is not only important, but crucial, to have the ability to negotiate directly with a peer or others. That means without electricity or cell phone coverage, too. YMMV
Oh, right, I agree. I guess my further point is that I'd prefer that after you close the sale and finish the transaction, you're sure you have the money. Cash and some electronic transfers give you that, while checks don't.
a semi-informed guess is that paper checks are uniquely useful for entering some kinds of contracts between ordinary people or small business. A check here has only five or so parts, but by controlling those well, checks can and are used in somewhat unexpected ways, and they can be formed to fit various ordinary contract clauses, too.
one surprising use of a check is that one could write five checks, each with an amount and further away date.. e.g. dated the first of the month for the next four months. Those checks are now a reliable source for a loan in cash, since you signed each one. there are many other examples..
one surprising use of a check is that one could write five checks, each with an amount and further away date.. e.g. dated the first of the month for the next four months. Those checks are now a reliable source for a loan in cash, since you signed each one. there are many other examples..
There is no law that states postdated check can only be cashed after the specified date. Some banks will happily cash your check immediately and simply ignore the future date on the check. There is no guarantee that you can always cache a check either. A check can be cancelled by the issuer at any time by making so called 'stop payment order'.
> There is no law that states postdated check can only be cashed after the specified date.
that is absolutely false IANAL
that is absolutely false IANAL
> Please note: The terms "bank" and "banks" used in these answers generally refer to national banks, federal savings associations, and federal branches or agencies of foreign banking organizations that are regulated by the Office of the Comptroller of the Currency (OCC).
they say a Federal Bank can do that. I was talking about contracts between private parties (see above)
they say a Federal Bank can do that. I was talking about contracts between private parties (see above)
Any bank can do it and in fact you can google like a dozen different articles stating so. Seems you just don't like being proven wrong
> > There is no law that states postdated check can only be cashed after the specified date.
you neglected to say "bank" .. you said it as if anyone can do it. Look at what you wrote
you neglected to say "bank" .. you said it as if anyone can do it. Look at what you wrote
So, there is a flywheel coming up to speed: FedNow [1]. I beat this horse to death here [2], but only because it is so revolutionary (for US financial infra). It catches us up with 54 other nation states with instant payment systems. It removes credit risk from delayed settlement, checks (and the risk that goes along with paper instruments), the need for a deposit account to underwrite you (if they simply disable any ability to go below $0). It's run by the Fed as a cost recovery utility, not a for profit enterprise to squeeze as much profit from as possible.
There are already 400 participants who have signed on in less than a year of the network being live [3] (the list includes Chase Bank and the US Treasury), and the CFPB is already getting in front of financial institutions attempting to charge insufficient funds fees for instant payments when unnecessary [4]. There are substantial entrenched interests fighting it (The Clearinghouse and their competing private RTP network, credit card rails, etc) due to the revenue at stake (~3-5% of the economy running through this FinInfra), but as long as the infra uptake continues and it isn't sabotaged by policy and lobbying, it will deliver more efficient value transfer at scale. Also helps when merchants surcharge credit card rail payments when cheaper alternatives are enabled.
Tangentially, the unbanked stand at ~4.5% in the US per the Fed [5]. That should be driven to as close to 0% as possible, which instant payments contributes towards (getting funds to recipients faster with less float and necessitating less or no credit extension, depending on use case).
[1] https://news.ycombinator.com/item?id=36801491
[2] https://hn.algolia.com/?dateRange=all&page=0&prefix=false&qu...
[3] https://www.frbservices.org/financial-services/fednow/organi...
[4] https://www.pymnts.com/news/cfpb/2024/cfpb-proposes-banning-...
[5] https://www.fdic.gov/analysis/household-survey/index.html
[6] https://en.wikipedia.org/wiki/Unified_Payments_Interface
[7] https://en.wikipedia.org/wiki/Pix_(payment_system)
(humorously, you mention it's very "Indian" when UPI [India's instant payment system] is probably the gold standard success story [6] alongside Pix [7] in Brazil)
There are already 400 participants who have signed on in less than a year of the network being live [3] (the list includes Chase Bank and the US Treasury), and the CFPB is already getting in front of financial institutions attempting to charge insufficient funds fees for instant payments when unnecessary [4]. There are substantial entrenched interests fighting it (The Clearinghouse and their competing private RTP network, credit card rails, etc) due to the revenue at stake (~3-5% of the economy running through this FinInfra), but as long as the infra uptake continues and it isn't sabotaged by policy and lobbying, it will deliver more efficient value transfer at scale. Also helps when merchants surcharge credit card rail payments when cheaper alternatives are enabled.
Tangentially, the unbanked stand at ~4.5% in the US per the Fed [5]. That should be driven to as close to 0% as possible, which instant payments contributes towards (getting funds to recipients faster with less float and necessitating less or no credit extension, depending on use case).
[1] https://news.ycombinator.com/item?id=36801491
[2] https://hn.algolia.com/?dateRange=all&page=0&prefix=false&qu...
[3] https://www.frbservices.org/financial-services/fednow/organi...
[4] https://www.pymnts.com/news/cfpb/2024/cfpb-proposes-banning-...
[5] https://www.fdic.gov/analysis/household-survey/index.html
[6] https://en.wikipedia.org/wiki/Unified_Payments_Interface
[7] https://en.wikipedia.org/wiki/Pix_(payment_system)
(humorously, you mention it's very "Indian" when UPI [India's instant payment system] is probably the gold standard success story [6] alongside Pix [7] in Brazil)
This system is one of the reasons PayPal's stock has imploded massively over the past ~18 months. FedNow will all but directly kill their primary business.
PayPal was around $290 / share in August 2021. Now $63 / share. Their business got larger in that time, not smaller. The market is front-running the end of the necessity (or general usefulness) of services like PayPal in the US. The stock is back to where it was in 2017, when PayPal was a far smaller business, and it's now trading for 14 times operating income. They better find a new, large business, fast.
PayPal was around $290 / share in August 2021. Now $63 / share. Their business got larger in that time, not smaller. The market is front-running the end of the necessity (or general usefulness) of services like PayPal in the US. The stock is back to where it was in 2017, when PayPal was a far smaller business, and it's now trading for 14 times operating income. They better find a new, large business, fast.
> FedNow will all but directly kill their primary business.
Good riddance. Come for Visa and Mastercard next. $57B in combined revenue in 2023.
Good riddance. Come for Visa and Mastercard next. $57B in combined revenue in 2023.
Interestingly the market isn't regarding FedNow as a serious threat to Visa & Co. at all. Visa's stock is at an all-time high ($569 billion market cap, making them the most highly valued financial services company in the world).
The belief must be that credit cards will retain their utility (purchase protection being one), both in the US and globally.
I would expect Visa's extraordinary margins to get damaged by FedNow.
The belief must be that credit cards will retain their utility (purchase protection being one), both in the US and globally.
I would expect Visa's extraordinary margins to get damaged by FedNow.
Agreed.
“There's no particular reason why this kind of financial intermediation should be a $100 billion industry, rife with inefficiencies.”
https://news.ycombinator.com/item?id=36012866
https://www.axios.com/2023/07/22/fednow-instant-payments-cre...
https://www.usbank.com/corporate-and-commercial-banking/cfo-...
https://www.moderntreasury.com/journal/bank-payments-as-a-cr...
“There's no particular reason why this kind of financial intermediation should be a $100 billion industry, rife with inefficiencies.”
https://news.ycombinator.com/item?id=36012866
https://www.axios.com/2023/07/22/fednow-instant-payments-cre...
https://www.usbank.com/corporate-and-commercial-banking/cfo-...
https://www.moderntreasury.com/journal/bank-payments-as-a-cr...
The market may be looking at the Europe where instant wire transfers are free and people use them (paying rent, phone, anything recurring, paying for larger items like a car). Often people use them to split a lunch bill.
Mastercard/Visa is a huge thing here in retail but PayPal is really niche. No app leveraging the instant wire transfers is getting much traction. The network effects are huge and the card fees apparently aren't that high.
Mastercard/Visa is a huge thing here in retail but PayPal is really niche. No app leveraging the instant wire transfers is getting much traction. The network effects are huge and the card fees apparently aren't that high.
Card fees here in Europe are capped on consumer cards at 0.2% for debit and 0.3% for credit.
This doesn't seem right. At least from the small business point of view. The banks here in CZ charge around 1 % + $10/month for the device and card acceptance.
Purchase protection is a minor thing. The credit card companies let you spend money to don’t have, and that is valuable to both sides of the transaction.
[deleted]
I think PayPal will do fine. FedNow requires a frontend for UI and to find contacts. PayPal and Venmo have that and people are used to using them. Instead of ACH transfers, they will do FedNow transfers.
They had to compete with banks and Zelle, and did fine. I think Zelle is doomed.
They had to compete with banks and Zelle, and did fine. I think Zelle is doomed.
I thought Zelle was just a friendly frontend to ACH?
Zelle runs on multiple networks (ACH, RTP, etc).
https://www.narmi.com/insights/getting-real-about-real-time-...
> Zelle is an example of a P2P option, but with one major difference from those outlined below; its transactions can be cleared via The Clearing House’s RTP rail. If both the payee and the recipient use banks that leverage the RTP rail, the transaction will settle instantly. If not, it will typically settle in a matter of minutes. Since users can send money to recipients outside of their bank and the funds settle in real-time (or nearly), it is considered to be an open (rather than closed) loop payment.
> Notably, Zelle has seen massive growth since its launch in 2017 and is now available to nearly 80% of the U.S. population, with adoption by over 1,600 financial institutions. Similar to The Clearing House, Early Warning Services (owner of Zelle) is privately held by 7 major banks.
https://danakivis.medium.com/the-state-of-faster-payments-in...
https://www.narmi.com/insights/getting-real-about-real-time-...
> Zelle is an example of a P2P option, but with one major difference from those outlined below; its transactions can be cleared via The Clearing House’s RTP rail. If both the payee and the recipient use banks that leverage the RTP rail, the transaction will settle instantly. If not, it will typically settle in a matter of minutes. Since users can send money to recipients outside of their bank and the funds settle in real-time (or nearly), it is considered to be an open (rather than closed) loop payment.
> Notably, Zelle has seen massive growth since its launch in 2017 and is now available to nearly 80% of the U.S. population, with adoption by over 1,600 financial institutions. Similar to The Clearing House, Early Warning Services (owner of Zelle) is privately held by 7 major banks.
https://danakivis.medium.com/the-state-of-faster-payments-in...
I bet you the markets keep T+2 and T+3 for a long, long time. Some habits die hard.
Catching up with 54 other nation states really sums it up. That flywheel has been revving up since 1871. Slow start.
And yes, it is unfair to compare US financials to Indian bureaucracy in the wide: Indian financials are innovative. They "got" money early on.
Catching up with 54 other nation states really sums it up. That flywheel has been revving up since 1871. Slow start.
And yes, it is unfair to compare US financials to Indian bureaucracy in the wide: Indian financials are innovative. They "got" money early on.
[deleted]
> "you're not from round here" risks
The what? I don't know what you're getting at with this.
> Checking for forgery, active forgery presumably underway
I learned just last week that forged cashier's checks are a risk, which you can get burned by even if your bank makes the mistake. Forged Cashier's checks! Insane. The whole purpose of those is to ensure the money exists before issuing.
The what? I don't know what you're getting at with this.
> Checking for forgery, active forgery presumably underway
I learned just last week that forged cashier's checks are a risk, which you can get burned by even if your bank makes the mistake. Forged Cashier's checks! Insane. The whole purpose of those is to ensure the money exists before issuing.
When I moved to NYC from Canada in 1998, I gleefully took my hiring bonus check drawn on a major US custodial bank to local banks in the expectation that I might easily open a bank account and begin integrating myself into the mainstream. And that feeling lasted maybe 10 minutes until I realized that considerable financial bona fides from Canada were considered suspicious or worse in America.
I remember with some clarity the moment that Chase Bank suggested that a letter of reference from my bank in Canada might ease matters and they'd just hold my check some extra time for their troubles. And I thought: I don't need to continue at this bank. There is a better than even chance that I can find a bank that treats me better than this.
That's what "you're not from around here" looks like.
I remember with some clarity the moment that Chase Bank suggested that a letter of reference from my bank in Canada might ease matters and they'd just hold my check some extra time for their troubles. And I thought: I don't need to continue at this bank. There is a better than even chance that I can find a bank that treats me better than this.
That's what "you're not from around here" looks like.
We’ve found that going to the bank the check was written on can help in scenarios like that.
Problem is most business checks are written against business banks.
Problem is most business checks are written against business banks.
> We’ve found that going to the bank the check was written on can help in scenarios like that.
That does not universally eliminate "you're not from around here". Anecdotally, some banks will fingerprint people who show up with a check from that bank if they don't already have an account at that bank.
That does not universally eliminate "you're not from around here". Anecdotally, some banks will fingerprint people who show up with a check from that bank if they don't already have an account at that bank.
Of course you can forge a cashier's check! It's just a piece of paper like a regular check.
I have a neighbor with a hobby of accepting and depositing forged cashier's checks from people who want to "buy" a car from him or do some other scam. He knows the checks will be counterfeit, so he leaves the money in his account to cover the the deposit and the $5 returned check fee. Then he posts them here:
https://www.saabnet.com/tsn/class/scam/
I have a neighbor with a hobby of accepting and depositing forged cashier's checks from people who want to "buy" a car from him or do some other scam. He knows the checks will be counterfeit, so he leaves the money in his account to cover the the deposit and the $5 returned check fee. Then he posts them here:
https://www.saabnet.com/tsn/class/scam/
Here in Sweden there are (since last year) no longer any banks that will cash a foreign check, no matter which country of origin, currency or bank. There used to be one that still did it at a quite steep fee, which became relevant for expats trying to cash their covid stimulus checks a couple of years ago, but now there are none. It's just a huge yarn of fraud and manual processing, it's not worth it.
Domestic checks barely exist either, the only way you'll ever see one is if the government owes you money for some reason but you haven't told them what your bank account number is.
Domestic checks barely exist either, the only way you'll ever see one is if the government owes you money for some reason but you haven't told them what your bank account number is.
Small town banks ask out of town counter customers more questions and are less likely to accept random cheques for cash or even transact with people. Go to a big city and they do anything for any stranger.
In some places its "keep money local" and in others its probably confidence they won't be left holding the baby in a scam.
UK check guarantee cards helped solve some of this by security pantomime.
In some places its "keep money local" and in others its probably confidence they won't be left holding the baby in a scam.
UK check guarantee cards helped solve some of this by security pantomime.
My employer has an on site credit union. Money from checks is immediately made available because there is a high level of trust.
> The what? I don't know what you're getting at with this.
When I moved to a new place, I couldn't pay for anything with a check because I still had my old address printed on the checks and most stores wouldn't accept checks with an out-of-state address printed on it. This was ~18 years ago, so things may be different.
When I moved to a new place, I couldn't pay for anything with a check because I still had my old address printed on the checks and most stores wouldn't accept checks with an out-of-state address printed on it. This was ~18 years ago, so things may be different.
I don't know about the out of state address part, but it would probably be pretty painful in general to go around stores in the US and try to pay by check these days. Some large stores probably would have the systems to handle it but it wouldn't be normal and would cause a lot of friction. Absent a credit/debit card, you'd be better off just using cash which wouldn't be normal either but would be widely accepted.
> Some large stores probably would have the systems to handle it...
What systems to handle it?
The cashier puts the check under the cash tray like you do for $100 bills, and then you toss the check in the cash bag that you send to the bank that night or at the end of the week or whatever, and the bank handles the check.
What systems to handle it?
The cashier puts the check under the cash tray like you do for $100 bills, and then you toss the check in the cash bag that you send to the bank that night or at the end of the week or whatever, and the bank handles the check.
Electronic check readers to take advantage of the Check 21 rules. I'm not sure how many places still have them but they were a fixture of large store checkouts 20-ish years ago when the rules came out. IIRC Walmart (and probably other stores but I have vague memories of Walmart...) even had a printer they could put a standard check into that printed the front information (date, dollar amount in words and digits, memo) for you.
Huh. In 2006? I also moved around then, and always just crossed out the address and wrote in my new address and no-one ever batted an eyelid. I think I was still doing that until 2014 when I ran out of old chscks!
I guess I was doing it to service providers rather than stores though - most stores would much rather have had a card payment even back then.
I guess I was doing it to service providers rather than stores though - most stores would much rather have had a card payment even back then.
2005 actually; I called my credit card company repeatedly to tell them "yes I've moved, charges in $NEW_CITY are not fraudulent, with little luck, so I was stuck paying with a check anywhere that wouldn't take Discover (my second card).
Not from around here="out of state" checks.
In practice, in my part of the US, it's incredibly rare for someone to write a check.
Across Appalachia (where I grew up and now live again) checks are now exceptionally rare, which likely means they're increasingly rare everywhere in the US. Appalachia is one of the poorest places in the US and nearly all stores utilize tap to pay (either tap by card or tap by phone), checks are rare, cash is increasingly rare.
You see a lot of people outside of the US try to talk about the US while having zero first-hand experience or real knowledge of it. It's very common behavior on HN and it's very common behavior on Reddit. They just repeat what someone else said as though it were automatically true.
You see a lot of people outside of the US try to talk about the US while having zero first-hand experience or real knowledge of it. It's very common behavior on HN and it's very common behavior on Reddit. They just repeat what someone else said as though it were automatically true.
I live in MA and I probably write 4 or so checks a month if you count the ones my bank writes. Only one or two actually hand-written. Maybe receive 1 every couple of months. I rarely pay with cash but it's not a freak even to see someone paying cash at the grocery store or for lottery tickets. So certainly not exceptionally rare.
My town charges a premium for tax payments on the web because they outsource it. So, yes, I pay by check.
My town charges a premium for tax payments on the web because they outsource it. So, yes, I pay by check.
I (in CA) just looked at my bank log and I hand-wrote 32 physical checks in 2023. That's in addition to the 39 checks my bank writes for me when I "Bill Pay" online. So that's roughly 6 checks a month. I always wonder about people who claim to never write checks. Like, really? Your local handyman or gardener actually accepts a credit card?
In fairness, if someone is renting, isn't paying local taxes, isn't paying local service people on a regular basis, etc. they probably don't need checks much.
Rent is probably the main reason I have written checks in the last 20 years. Most places, I have the option of using a outsourced service with a terrible website and "convenience" fees, or I can simply hand my landlord a check for the amount. I can tell my bank to automatically mail a check on a schedule. With larger landlords I'm not sure a physical check ever actually exists, but I'm still "writing a check".
These days? Yes.
Even when cheques were used here, they often wouldn't accept cheques and would insist on cash because they didn't want the hassle of cashing cheques especially for such relatively low value transactions. Maybe if you were redoing your heating system they might take one, but a maintenence callout? Nah.
Even when cheques were used here, they often wouldn't accept cheques and would insist on cash because they didn't want the hassle of cashing cheques especially for such relatively low value transactions. Maybe if you were redoing your heating system they might take one, but a maintenence callout? Nah.
> Your local handyman or gardener actually accepts a credit card?
Zelle? 2k+ banks and credit unions support it.
https://www.zellepay.com/get-started
Zelle? 2k+ banks and credit unions support it.
https://www.zellepay.com/get-started
Personally I have never used it and have never had an issue with giving a service person a check.
[deleted]
Everyone takes venmo now.
Or they talk about what it was like when they lived there, not realising that things have changed in the past 5/10/20 years.
It's easy enough to find statistics on this sort of thing.
"By number, checks declined at a rate of 7.2 percent per year since 2018, dropping to 11.2 billion [in 2021]."
That's about 35 per person per year.
It seems to be around 1.2 billion in France (17 per person), around 100 million in Italy, and much, much less in the other EU countries.
Overall for the EU excluding France about 0.25 per person.
https://www.federalreserve.gov/paymentsystems/fr-payments-st...
https://www.statista.com/statistics/443677/cashless-payment-...
"By number, checks declined at a rate of 7.2 percent per year since 2018, dropping to 11.2 billion [in 2021]."
That's about 35 per person per year.
It seems to be around 1.2 billion in France (17 per person), around 100 million in Italy, and much, much less in the other EU countries.
Overall for the EU excluding France about 0.25 per person.
https://www.federalreserve.gov/paymentsystems/fr-payments-st...
https://www.statista.com/statistics/443677/cashless-payment-...
Very common on Twitter too.
I have FD in an Indian bank, and I lost the receipt/certificate they gave me. It's going to be a month-long process to get my money back.
In America, it's not like Indian bureaucracy levels of insane slowness.
In America, it's not like Indian bureaucracy levels of insane slowness.
Very few people these days use checks, FWIW, and all checks are electronically checked (and instantly cleared) at the local store. You can still forge a check, but the account that backs it has to have funds and you'll also need to forge an ID.
They’re certainly not instantly cleared in the standard banking use of the term?
I don’t doubt that you can reduce risk by e.g. using novel infrastructure which looks up the account number on the check then uses (for example) a debit card network to check the account’s currently available balance. However, even if you were looking at someone’s balance on their mobile app while they were writing the check to you, that would not suffice to guarantee that the check would not be returned as NSF. The bank can choose to NSF it for a variety of reasons, for example if they prioritize “today’s” debit card transactions over “today’s” checks in the posting order, or a check previously deposited (and included in that available balance) gets NSFed and yanked back by another bank.
I don’t doubt that you can reduce risk by e.g. using novel infrastructure which looks up the account number on the check then uses (for example) a debit card network to check the account’s currently available balance. However, even if you were looking at someone’s balance on their mobile app while they were writing the check to you, that would not suffice to guarantee that the check would not be returned as NSF. The bank can choose to NSF it for a variety of reasons, for example if they prioritize “today’s” debit card transactions over “today’s” checks in the posting order, or a check previously deposited (and included in that available balance) gets NSFed and yanked back by another bank.
I think the article glosses over the fraud aspect a lot. I would expect these places to be prime targets for all kinds of fraud. I'm surprised personal checks are accepted at all and (if the example in the article is realistic) so cheaply.
They have to manage that somehow beyond a reputation system. Part of it might be the legal system - I believe check fraud is seen as more serious, with much higher penalties, in many countries, specifically because the system of checks wouldn't work without it.
They have to manage that somehow beyond a reputation system. Part of it might be the legal system - I believe check fraud is seen as more serious, with much higher penalties, in many countries, specifically because the system of checks wouldn't work without it.
> Now you shouldn’t expect from me the level of academic rigor associated with scholars at e.g. Harvard; on the Internet, we cite our sources.
since you're comfortable making a jab like that, would you mind linking me to specific passages that the Harvard lady failed to cite in her work? the whole scandal is so buried in surface-level coverage that i legitimately cannot figure out what she failed to cite.
since you're comfortable making a jab like that, would you mind linking me to specific passages that the Harvard lady failed to cite in her work? the whole scandal is so buried in surface-level coverage that i legitimately cannot figure out what she failed to cite.
To a German, where checks never were a thing, because we moved to wire transfer at the beginning of the 20th century, this is amazing.
I am happy for you that you live in the blissful ignorance of thinking checks aren't a thing in Germany. You will curse the day you discover you're wrong.
They are exceptionally rare, to the point where many people have never seen one and fintech/neobanks simply don't support them at all. Unfortunately, some organizations/businesses do use them. They're particularly popular when some entity is required to pay you, knows your postal address, doesn't know your bank account, and doesn't care about your satisfaction with them. They just mail you a check and are done with it, making it your problem. As a bonus, they have a good chance of not having to actually pay you because you don't want to deal with the check or forget.
Of course, there is no electronic deposit either.
And while I'm talking about German companies above, US companies of course absolutely love doing this for the same reasons, meaning you have a foreign, USD denominated check. Hopping on a flight to New York and going to one of these check cashing places might be the easiest way to cash these, and could be comparable in cost to trying to do it locally.
They are exceptionally rare, to the point where many people have never seen one and fintech/neobanks simply don't support them at all. Unfortunately, some organizations/businesses do use them. They're particularly popular when some entity is required to pay you, knows your postal address, doesn't know your bank account, and doesn't care about your satisfaction with them. They just mail you a check and are done with it, making it your problem. As a bonus, they have a good chance of not having to actually pay you because you don't want to deal with the check or forget.
Of course, there is no electronic deposit either.
And while I'm talking about German companies above, US companies of course absolutely love doing this for the same reasons, meaning you have a foreign, USD denominated check. Hopping on a flight to New York and going to one of these check cashing places might be the easiest way to cash these, and could be comparable in cost to trying to do it locally.
I have received checks in Germany in the last decade, specifically when a health insurer refunded premiums but did not have bank details on file for me.
Sorry, not a native English speaker, probably missused "not a thing". I thought it would mean "not important" or "not something people use all the time" or "irrelevant".
You wanted “not common”, sounds like.
“Not a thing” is a confusing idiom. It specifically means never happens, ever, but the idiom is frequently used in contexts where hyperbole is expected, so a literal translation accounting for the hyperbole might be something more like “I’ve seen it once, but it’s vanishingly rare”.
“Not a thing” is a confusing idiom. It specifically means never happens, ever, but the idiom is frequently used in contexts where hyperbole is expected, so a literal translation accounting for the hyperbole might be something more like “I’ve seen it once, but it’s vanishingly rare”.
Techniker Krankenkasse still sends paper cheques.
I wouldn't consider Germany to be avant-garde of banking in any sense.
I wouldn't consider Germany to be avant-garde of banking in any sense.
Honestly this is a bit crazy to me. Why does processing a check require an extension of credit here in 2024? Why can't the banks validate the check and transfer the money while you wait a few seconds at the teller window? All of the alternative fintech solutions can do that. The prepaid debit cards that unbanked people use instead can do that. Heck, even the blockchain can do it, for way too much money.
Sure, back in the day of couriers carrying checks, it made sense that it might take a few days to know. Today, with the internet and electronic presentment, theoretically the whole system could be transparently replaced with one that can clear the vast majority of checks in seconds.
Banks could offer checking accounts to even the least creditworthy people simply by not extending them any credit.
Sure, back in the day of couriers carrying checks, it made sense that it might take a few days to know. Today, with the internet and electronic presentment, theoretically the whole system could be transparently replaced with one that can clear the vast majority of checks in seconds.
Banks could offer checking accounts to even the least creditworthy people simply by not extending them any credit.
> in 2024? Why can't the banks validate the check and transfer the money while you wait a few seconds at the teller window?
In late 2023 FedNow was introduced, which should facilitate exactly that. But it's optional for banking institutions, and the US is riddled with small institutions that cannot or will not volunteer their capital to invest in the tech required.
In late 2023 FedNow was introduced, which should facilitate exactly that. But it's optional for banking institutions, and the US is riddled with small institutions that cannot or will not volunteer their capital to invest in the tech required.
FTA: "it’s really hard to expressively, passionately hate this business and not hate the young lady working in it"
Fact check: so false, as to call in question the author's good faith.
Fact check: so false, as to call in question the author's good faith.
check or cheque?
Aren't they both obsolete?
In American English, "check". In British English, "cheque".
Does one cash a cheque or cache a cheque? A user upthread seems to think it is the latter, and that really bothers me for some reason.
Honestly, the article rambled & ranted as much as it informed.
TL;DR: Check cashing exists because banks don't want to deal with people who deposit checks with a high risk profile (whether due to fraud or lack of funds by the payer). Unsurprisingly, this risk gets priced into the product.
Dealing with bounced checks from such people often involves behavior that most of a bank's customers would consider somewhere between impolite and disturbing. Also, many consumers of check cashing do not have state issued IDs and may not be up for dealing with KYC checks.
The situation has gotten somewhat better for low income people in that government benefits are delivered electronically, without needing to cash a check and some emerging electronic payment options may improve it further.
TL;DR: Check cashing exists because banks don't want to deal with people who deposit checks with a high risk profile (whether due to fraud or lack of funds by the payer). Unsurprisingly, this risk gets priced into the product.
Dealing with bounced checks from such people often involves behavior that most of a bank's customers would consider somewhere between impolite and disturbing. Also, many consumers of check cashing do not have state issued IDs and may not be up for dealing with KYC checks.
The situation has gotten somewhat better for low income people in that government benefits are delivered electronically, without needing to cash a check and some emerging electronic payment options may improve it further.