Dear Dr. Don,
Would you expect a bank to start paying interest on a deposit at the end of the check-clearing period or when the funds are actually transferred to the bank?
I think I understand why banks set a period — seven days, for example — for the funds to be available, but I assume the actual funds arrive long before the end of that period. Doesn’t the money transfer from one bank to another overnight? It seems like my bank is receiving the money one or two days after the check is deposited but not starting to pay interest for several more days.
— Michael Money
The bank’s ability to place money deposited to your account on hold is regulated by the Federal Reserve Board under Regulation CC: Availability of Funds and Collection of Checks. Fund availability can be different, however, from when the money on deposit starts earning interest.
ING, for example, starts paying interest on a deposit two days after it has been processed. That’s true even for funds on hold and unavailable for your use at the bank. Discuss your bank’s policy with your banker.
In today’s low interest rate environment, it’s easy to dismiss a day’s interest here and a day’s interest there as inconsequential. When dealing with large sums, however, it pays to sweat the small stuff. If you’re not happy with your bank’s policy and you’re losing enough interest for it to be a concern, then it’s time to start shopping banks for an interest policy that’s more beneficial to you.
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