According to a Federal Reserve report, about four billion paper checks were issued last year that amounted to almost $8 trillion! However, cashing foreign exchange checks drawn on banks from foreign countries or in a different currency is not a simple process.
The laborious process of cashing a foreign check
Paper checks are still widely used across the world despite the shift towards a cashless society and a surge of electronic payments, debit cards, and credit. While it may be simpler to write a check, cashing one can be a painful process.
How banks process foreign cheque
Banks may process a cheque made out in a foreign currency either by negotiation or by collection.
- Payments by negotiation – The bank credits the account with the cheque funds within a few days or weeks. Payment by negotiation is an option for cheques made out in the same currencies.
- Payments by collection – Cheques made out in different currencies are paid by collection, and it means a considerably longer waiting time for your money.
Even though cheques are on the decline, cashing foreign checks is a lengthy and complicated procedure. As there is no system for clearing cross-border cheques, certain issues remain in the process of cashing a foreign check.
- Banks discourage checks
You cannot cash foreign checks at major international banks such as Citibank, JP Morgan Chase, Bank of America, Wells Fargo, and more. Apart from these, you cannot cash foreign checks at credit unions, regional banks, grocery stores, currency exchange companies, and Gas stations.
- Lengthy process
International banks with branches in multiple countries will take about two weeks to process foreign checks. So, even if your bank accepts the foreign check, you may have to wait for days or weeks to get it cleared based on the currency and the bank.
- Extremely expensive
Banks and financial institutions charge hefty fees for depositing foreign checks. As foreign checks are generally couriered, it can be expensive to send these checks unless there are frequent volumes. Moreover, the financial Institutions can hold foreign checks till they have sufficient volumes to offset the courier and batch fees.
- Availability of funds
The foreign checks need to be coordinated with the central processing of the banks and financial institutions for the availability of funds. The courier expenses and other charges delay availability further depending upon its internal process. Bank chains and credit unions cannot handle large cash transactions involving larger checks.
- Account and proper identification
By law, any bank is allowed to refuse a check if the writer of the check does not have an account with that bank and proof of identity. Banks feel responsible for themselves against check fraud and will not honor any foreign checks if there is no account and proper identification.
So, how does one cash a how to get funds from a foreign check?
Below are some tips to keep in mind to face minimum hassle when cashing a foreign check.
- It is highly recommended to find either a foreign bank branch or their affiliate bank to make the process simpler and cost-effective.
- Ensure that the bank or credit union or the financial institution accepts foreign checks for processing and learning about their rules and norms.
- Get general information on foreign check deadlines, availability, and fees with the bank you are delaying with check out their foreign check fee schedule and get info about exchange rates.
- Any foreign check with a lower face value is not worth processing as one ends up paying more processing fees, and it may even get closer to or higher than the actual value of the check.
- Call ahead to the bank manager when you have to deposit or can a check for a substantial amount of money. You may have to visit the main branch of the bank to deal with the transaction
- Learn about the person or company who has written the foreign check to prevent any scams. The bank fees for bounced checks can be very high.
Banks carry the final decision when cashing a foreign check and to pay or not to pay. They can charge what they like, and any extra charges or fee is debited from the beneficiary’s account. Moreover, exchange rate adjustments will apply when processing.
How technology can help
The technological advances are already eliminating issues and expenses related to inefficient financial processes and unavailable funds. Technology and regulatory changes in countries such as Canada and the US allow to scan the foreign checks under strict compliance and monitoring and send them to the processing agent directly and get them to credit the very next day. As 99% of all foreign checks are drawn in USD and CAD, it is a welcoming change as it gets rid of courier and mail fees and speeds up the processing.
Check 21 is helping clear checks faster in both USD and CAD. Currency Exchange International or CXI has introduced Digital Remote Deposit for clearing all foreign checks drawn on Canadian financial institutions.
All you need to do is stay proactive and be more vigilant when writing a foreign check or accepting one. In order to safeguard your institution and customer’s interests, it is of utmost importance to know the rules and regulations related to cashing a foreign check (UK) and be confident about the sources of foreign checks. You may have to take on some unappealing options such as opening an account with a bank that cashes foreign cheques or get the money transferred electronically.