Clearing cycle
Overview
The ‘clearing cycle’ is a term used to describe the process that a cheque follows from being paid into a Lloyds TSB business bank account until it is cleared.
Paying money into your account
Making payments by cheque
How to stop a cheque
Returned cheques and other items
Unpaid cheques
Out-of-date cheques
Paying money into your account
Timeline
When you pay in cheques drawn on other banks, they are processed through a standard central clearing cycle.
This works as follows (‘days’ are bank working days – that is, Monday to Friday, 9am until branch closure time or 5pm, whichever is the earliest – excluding Bank Holidays).
Day 0 Day of Deposit
- Cheques are paid in.
- They are sorted overnight, according to the bank on which they are drawn (i.e. the bank where the issuer has his/her account), and are transported to an exchange centre.
Day 1
- Cheques are exchanged between the banks.
- Issuing banks process them in their internal systems.
Day 2 Cleared for Value
- Banks exchange the value of the cheques.
- Issuing banks decide whether to honour the cheques.
- The following events also happen. These are Lloyds TSB’s timings, although they are common to most banks.
- The issuing customer’s account is debited.
- Payees receive value (i.e. they begin to earn interest on the money, or overdraft interest begins to reduce, as applicable). The cheque is said to be ‘cleared for value’.
Day 3
- The money may be available for withdrawal over the counter by arrangement.
Day 4 Cleared for Withdrawal (need not be a working day)
- The money is available for withdrawal through any channel.
- Although customers have the right to withdraw funds at this date we still have the right to debit unpaid cheques to their accounts until the cheque is “Cleared for Fate”
Day 6 Cleared for Fate
- This is the last day on which we are permitted to take back the funds from a customer’s account without their permission if we are advised that the cheque has not been paid. NB this will normally happen on day 3 but delays can sometimes occur.
- From the end of this day, customers can be certain that the funds are theirs. If the Bank later finds that the cheque is not paid, we will not take the funds back from the customer’s account but will write to advise them out of courtesy.
If you require absolute certainty that funds received into your account cannot be reclaimed by the paying bank, you should consider alternative means of payment. Your relationship manager will be happy to discuss alternative options with you.
Cheques drawn on Lloyds TSB customers
- The same cycle applies to cheques drawn on other business customers who bank with Lloyds TSB, except when the cheque is paid into the branch it is drawn on. In this case the funds will be processed as cleared and available for withdrawal via any channel the next day.
- Cheques issued by Lloyds TSB personal customers normally clear the same day if paid into any Lloyds TSB branch. If this is not possible, the cycle above will apply.
- Cheques drawn abroad, in Sterling and/or foreign currency, may be paid in, but will follow a different process. Please refer to your relationship manager.
- We will give you a paying-in book, personalised with your business name, account number and branch sort code, to help move payments through the clearing cycle.
Cheques drawn in Scotland and Northern Ireland
Cheques drawn on banks/branches in Scotland and Northern Ireland clear in the same timescales as English and Welsh cheques. The cycle may be longer when paying in via other financial institutions or agents (such as Post Offices) as the cycle will not start until Lloyds TSB receives the cheques.
Making payments by cheque
If you make a payment to someone by cheque, and they deposit that cheque at your own branch, the money will leave your account on the same day. If it is paid in at another Lloyds TSB branch or another bank, the money will not leave your account until the third working day.
For cash withdrawals you can write a cheque with the word ‘cash’ on the ‘pay’ line, and hand it over at the counter at any branch of Lloyds TSB.
You will need to provide some form of identification such as a Photo ID drivers licence or passport.
If you wish to withdraw a large amount of cash, please let us know in advance. If you cash a cheque at a Lloyds TSB branch, the money will leave your account that day.
For added security, if you make a cheque payable to a utility company (e.g. water or electricity companies) or to a financial company (e.g. a bank or credit card company) include your account number after the company name on payee line of the cheque.
How to stop a cheque
Sometimes, you may need to stop a cheque being paid. To do this, you should phone your service centre as soon as possible, giving details of any replacement cheque that you write.
To stop a cheque, we will need to know:
- cheque number,
- amount,
- date of issue,
- payee.
A fee is payable for stopping a cheque, unless the cheque has been reported as lost or stolen.
You will need to follow a similar process if your cheque book is lost or stolen.
Returned cheques and other items
If we need to return a cheque you have written or another item drawn on your account due to lack of funds, we will contact you directly with the information and details of any charges.
Unpaid cheques
If we have been advised that a cheque you have paid into your account is being returned unpaid, we will write to you with details of the unpaid cheque. This will usually be within two working days of the advice to us.
Out-of-date cheques
In the past, banks generally treated cheques as out of date if they were written more than six months ago. Not because the cheque had become invalid, but just as a precaution in case it was lost or stolen. This practice is less common now and most banks will only return very high value cheques because they're considered out of date. However, you should be aware that it is still possible that we or another bank could return a cheque as out of date, so if you have one that's more than six months old you should ask the person you got it from to write a new one and destroy or return the old one.
As a cheque that is more than six months old can be paid, you should never rely on us to return a cheque unpaid purely because it was written more than six months ago. If you don't want a particular cheque to be paid then it should be stopped.
Further information on the clearing cycle is available on visiting the APACS website (link will open a PDF document in a new window).