Definition
Cleared for Fate denotes the date on which the payer’s bank has verified that funds are available for a transfer according to the instructions given in a cheque. This process ensures that the money is now committed to the payee and typically takes up to four working days after the cheque has cleared for value. Once a cheque has cleared for fate, the funds transferred cannot typically be reclaimed unless there is evidence of deliberate fraud.
Examples
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Cheque Deposit Process:
- Example: John deposits a cheque from his employer on Monday. By Friday, the cheque is cleared for fate, meaning the funds are now available in John’s account, and his employer’s bank has confirmed the availability of the funds.
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Non-Fraudulent Transactions:
- Example: Maria receives a cheque as payment for freelance work. The cheque is deemed cleared for fate four days later, ensuring that she has the funds in her account and that they cannot be reversed unless fraud is detected.
Frequently Asked Questions
Q1: What is the difference between “cleared for value” and “cleared for fate”?
A1: “Cleared for value” refers to the initial phase when the cheque amount is credited to the payee’s account, although the payer’s bank has not fully completed the checks. “Cleared for fate” occurs once the cheque processing is fully complete and cannot be reversed unless there is fraud evidence.
Q2: How long does it take for a cheque to be cleared for fate?
A2: It typically takes up to four working days from the time a cheque has cleared for value for it to be cleared for fate.
Q3: Can funds cleared for fate be reclaimed?
A3: Generally, funds cleared for fate cannot be reclaimed unless there is compelling evidence of deliberate fraud.
- Clearing Cycle: The series of procedural steps a cheque goes through from the point it is deposited to when the funds are made available for withdrawal.
Online References
Suggested Books for Further Studies
- “Modern Banking” by Shelagh Heffernan
- “Banking and Financial Institutions: A Guide for Directors, Investors, and Borrowers” by Benton E. Gup
- “The Principles of Banking” by Moorad Choudhry
Accounting Basics: “Cleared For Fate” Fundamentals Quiz
### What does "Cleared for Fate" mean in banking?
- [ ] The process of opening a new bank account.
- [x] The date when the payer's bank confirms that funds are available.
- [ ] The method of applying for a loan.
- [ ] The closure of an outdated bank account.
> **Explanation:** "Cleared for Fate" refers to the date when the payer's bank has verified that funds for a transfer are available, following the instructions in a cheque.
### How long does it take for a cheque to be cleared for fate after clearing for value?
- [ ] One working day
- [x] Up to four working days
- [ ] Two weeks
- [ ] Instantaneously
> **Explanation:** It typically takes up to four working days from the point a cheque has cleared for value to be cleared for fate.
### Can a payer reclaim their funds after a cheque is cleared for fate, and under what condition?
- [ ] Yes, anytime
- [ ] No, never
- [x] Only if there is evidence of fraud
- [ ] Only if the cheque is less than $100
> **Explanation:** Generally, funds cannot be reclaimed after a cheque is cleared for fate unless there is clear evidence of deliberate fraud.
### What must be verified by the payer's bank before the cheque is cleared for fate?
- [ ] The payer's signature
- [x] The availability of funds
- [ ] The type of cheque
- [ ] The bank branch
> **Explanation:** The payer's bank must verify the availability of funds before a cheque can be cleared for fate.
### What happens if a cheque is found to be fraudulent after being cleared for fate?
- [ ] The bank clears the cheque anyway.
- [ ] The payee receives a penalty.
- [x] The funds may be reclaimed.
- [ ] The cheque is returned to the payer.
> **Explanation:** If evidence of fraud is found after a cheque is cleared for fate, the funds transferred to the payee can be reclaimed.
### How does the duration of 'cleared for fate' compare to 'cleared for value'?
- [x] Same
- [ ] Shorter
- [ ] Longer
- [ ] Dependent on the bank
> **Explanation:** 'Cleared for fate' typically takes additional time (up to four working days) after a cheque has initially cleared for value.
### Which term best relates to the series of steps cheques undergo in banks?
- [ ] Loan application
- [ ] Financial audit process
- [x] Clearing cycle
- [ ] Mortgage approval
> **Explanation:** The term "clearing cycle" refers to the series of procedural steps a cheque undergoes from deposit to availability of funds.
### What general assurance does clearing a cheque for fate provide to the payee?
- [ ] Immediate credit increase
- [ ] Loan approval
- [x] That the funds cannot be reclaimed barring fraud
- [ ] Unlimited cheque withdrawal
> **Explanation:** Clearing a cheque for fate provides assurance to the payee that the funds transferred cannot be reclaimed unless there is evidence of deliberate fraud.
### What is primarily checked during the 'cleared for fate' process?
- [x] Fund availability
- [ ] Cheque color
- [ ] Payee's credit score
- [ ] Bank location
> **Explanation:** The primary check during the 'cleared for fate' process is the availability of funds in the payer's bank account.
### What could be a consequence if a cheque doesn't clear for fate due to insufficient funds?
- [ ] The payee gets a fine.
- [ ] The payer gets a bonus.
- [x] The cheque is returned and the transaction fails.
- [ ] The bank upgrades the payer's account.
> **Explanation:** If a cheque doesn't clear for fate due to insufficient funds, the transaction fails, and the cheque is returned.
Thank you for diving into the concept of “Cleared For Fate” and engaging with our detailed quiz. Keep enhancing your financial literacy and awareness!
