‘I received an insurance claim’: Why does it take 5 days for my check to

Dear Quentin,

I have a banking question for which I would like to get further clarification. I received an insurance-claim check for $22,000, written against a Bank of America account.

On Tuesday morning, I deposited the check into my bank account. But none of the funds will be available until essentially five business days later. 

Why does it take that many days for an internal “your branch to my account” transfer of funds? Other than verifying the availability of the funds, what on earth is happening that requires five days?

Curious Customer

“Checks are an old-fashioned payment method, and rely on more archaic processes to clear.”

MarketWatch illustration

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Dear Curious,

Given that settling the average insurance claim can take anywhere from 30 days or more for automobile insurance to nearly five months for homeowners insurance, I’m assuming your question about your check taking five days to clear is because a) you are simply curious as to the mechanics of paying by check or b) you’ve waited so long by this point that the final days appear more torturous than the preceding months.

When a bank takes time to process a check, it’s doing so to ensure the check’s validity. Checks are ripe for fraud. In fact, the Better Business Bureau recommends signing checks in black gel ink, which it says is more difficult to tamper with than regular blue or black pens. “The Crown” actress Claire Foy recently refused to sign an autograph in blue ink; some experts say blue biro is easier to scan for nefarious purposes, while others say such concerns are overblown.

Checks are an old-fashioned payment method, and rely on more archaic processes to clear. “We would assume a hold has been placed on the check referenced,” a Bank of America spokesperson told MarketWatch. “A hold can be placed on a check for a variety of reasons — the amount of the check, concerns about the validity of the check, etc. The hold allows us time to research and verify the check, including contacting the maker of the check if needed.” Read more here.

Paper checks rely on a legacy network

Paper-based payments rely on a legacy network to process and return checks. For instance, an income-tax refund can take anywhere from three to eight weeks to arrive. The paying bank has a certain amount of time to verify that the check is valid and authorized. If the…

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