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Lodgements and Credit Transfers

Overview

Many payment instruments are stand-alone instruments - they contain sufficient information on both payer and payee, and their respective banks to complete the transaction.  Cheques and cash are not stand-alone. So a lodgement mechanism is required to link the cash and cheques to the account of the payee. 

A business will normally assemble a lodgement each day, consisting of all cheques and cash received, together with a lodgement docket showing the total value of the bundle and the details of the destination account.  The procedures for accepting lodgements may vary.  Some banks prefer to dispense with the paper lodgement docket, and prepare an electronic docket by swiping a bank card.  Some check the lodgement in the presence of the customer. Some prefer that smaller lodgements are just dropped into a lodgement post-box for later processing.

If the lodgement is brought to the account-holding branch of the account to be credited, then it is classified as a "lodgement".   If it is brought to another branch or bank for transmission to the account-holding branch, then it is classified as a credit transfer. 

Most lodgements or credit transfers are pre-printed with the banking details of the relevant account.  Inter-bank credit transfers must be pre-printed.

For personal accounts, most banks provide a number of lodgements in the back of the cheque-book.  For business accounts, there may be separate books for cheques and credits.

Credit Transfers (Giros)

Credit transfers may be first-party or third-party and may be inter-branch or inter-bank.  Usage, rules, delivery times may vary.  First-party arises where the items are being lodged by a person or company to his (its) own account.  Third-party arises where the item(s) are lodged by the person or company to another account e.g. a utility bill.

 

Inter-branch Credit Transfer

Inter-bank credit transfer

First-party

Typical usage:-   Branches of a business lodging to the parent account

Volume:-  High

Clearing time:-  Immediate or close-to-immediate for most banks

Unpaid return time:- may be one or more days longer than lodgement at account-holding branch

Typical usage:-   Branches of a business lodging to the parent account - normally by special arrangement, for example, where the account-holding bank does not have an office close to a branch of the business

Volume:-  Low

Clearing time:-  Credit must be routed through credit clearing - will arrive at destination branch typically 2 days later.  Credit transfer must have MICR coding (those funny figures like you see on the bottom of a cheque)

Unpaid return time:- may be one or more days longer than lodgement at account-holding branch

Third party

Typical usage:-   Payment of utility bill

Volume:-  High but declining

Clearing time:-  Immediate or close-to-immediate clearing to the account-holding branch.  Note that this does not necessarily mean that it will be processed by the payee company immediately

Unpaid return time:- Bank does not have automatic right to debit an account in the event of an unpaid arising - it may seek immediate payment in cash

Typical usage:-   Payment of utility bill

Volume:-  High but declining

Clearing time:-  Credit must be routed through credit clearing - will arrive at destination branch typically 2 days later.  Credit transfer must have MICR coding (those funny figures like you see on the bottom of a cheque). Note that this does not necessarily mean that it will be processed by the payee company immediately

Unpaid return time:- Bank does not have automatic right to debit an account in the event of an unpaid arising - it may seek immediate payment