9/12/2004

New Check System

During the summer I did an internship at a financial institution and it amazes me how many people try and cheat the system. By this I mean they will write checks and know that it will take about three to four days to hit their account if the company cashes it right away and they try to give themselves some extra time to put money into their accounts. Most of the time this never works. There were at least twenty checks every night that would never clear a members account. Checks are not being used for their intended purpose. People are trying to use checks as a temporary loan and they are not intended for that.

I read an article from MSNBC that stated that checks are now going to be coming out of people's accounts within hours. This will cause a lot of problems. People now have to rethink their ideas about checks. A lot of people will end up with bounced checks if they write the check with out the money in their account. The financial institutions will now be scanning all of the checks and a scanned copy of the check will be sufficient for proof of payment. Many people instead of making sure they have enough money will now be paying for service charges for the return checks that they write. They will end up paying more if they don't have the money to begin with. It was stated in the article that there will be about 7 million more checks will be hit with overdraft charges. With the new check system it will be interesting to see how badly it will affect the public. It is nice to see that financial institutions are now doing something about this problem.

3 comments:

John West said...

It is not hard to imagine that there are people out there that would perpetrate such acts in order to buy themselves more time. Americans are seriously in debt and you only have to look as far as your neighbor to possibly see someone that is suffering from severe credit card debt. American society has digressed to think that if we see something that we like, we must have it even if we don't currently have the funds for it. One possible solution is to teach younger children the value of money. Also, in that teaching you must intill good work ethic in them.

peter_parker said...

It's no surprise that people abuse the check system in such a way. It's normal for people to want something now and pay for it later. Debt is always increasing.

Check 21 will definitely advance the check system and will not only cause people to use checks as they are legally intended- to represent actual funds. It will provide a powerful weapon against fraud.

Dr. Tufte said...

I think this is an old scam that is slowly fading.

An interesting Managerial Economics question is: why has this scam persisted for so long? I think the answer is that it wasn't cost effective for banks to police more actively. As the technology to prevent this scam got cheaper, they took advantage of it.