6 ways to buy checking 'float' time |
| By Jay MacDonald • Bankrate.com |
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Is your bank speeding money out of your checking account faster than you can put it in? Do you feel
like someone just set your financial hamster wheel on fast-spin?
Welcome to the new reality of check "float" -- or lack thereof. Float refers to the time it takes for
money to leave your checking account.
If you've always paid your bills on time with money to spare, you may never have given float a second
thought and probably haven't noticed its disappearance.
But if you routinely pay bills a few days before payday hoping a paycheck will clear before creditors
ask your bank for payment, you've probably discovered that playing the float game doesn't work anymore.
Fear not: We won't let you sink. There are numerous ways to establish your own "virtual float" to help
buy you the time you need to pay your bills.
| Legislation has virtually eliminated the grace period for bill payers. Here are six moves you
can make today to reclaim some lost "float" time. |
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"Bank float" refers to the time it takes for your creditors (credit card issuers, mortgage servicers,
utilities, etc.) to run your check through their bank to your bank to complete your payment.
In 2003, Congress passed the Check Clearing
for the 21st Century Act, more commonly known as Check 21.
Banks lobbied heavily for the measure,
which mandates that banks use imaging technology to create a substitute check image of your actual check in order to speed
processing.
The change cut bank float from a week or more down to 48 hours or less in most cases, thereby virtually
eliminating bank float for consumers who had come to depend on the grace period.
While it mandates faster check processing, Check 21 did little to shorten bank hold times, which is the
time your bank takes to process your paycheck and other deposits.
The result: Banks eliminated your float while retaining theirs.
A separate type of float -- "mail float" -- refers to the time it takes your check to physically reach
your creditors through the mail. Mail float times have been unaffected by recent legislative changes to banking procedures.
What's the solution to the end of the traditional consumer grace period? We call it "virtual float."
After all, float has always largely been a trick of the mind, a bit like setting your wristwatch five minutes
ahead so you won't be late for a meeting. Just because the banks have taken "real" float away doesn't mean you can't develop
your own techniques to reclaim that lost liquidity cushion.
Sign up for direct deposit
Signing up for direct deposit can get a paycheck into your bank account faster than any other method.
"It's not instantaneous, but it is sooner," says Gail Hillebrand, senior attorney at Consumers Union. "You usually get the money on midnight of the day it's due. Generally, you're going to
cut a couple days off the bank's hold time at least."
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