§ 1422 Interest On Deposited Checks

This law says banks must start calculating interest on money you deposit by check as soon as they get temporary credit for that check. If the check bounces, they don’t have to pay you interest.

Key Takeaways

•Banks must start paying interest on your check deposit as soon as they get provisional credit.
•If the check bounces, you don’t get any interest.
•Interest is calculated using the money amount, interest rate, and time it’s in the account.

Example

You deposit a $100 check into your savings account.

The bank must start paying you interest on that $100 as soon as they get provisional credit for the check, even if it takes a few days to fully clear. But if the check bounces, they don’t owe you any interest.

How to Calculate

Interest = Principal × Rate × Time

Find out how much money you deposited (Principal).
Know the interest rate (Rate) your bank gives for the account.
Count the days (Time) the money is in the account after the bank gets provisional credit.
Multiply these numbers to find the interest.

You deposit a $500 check, and the bank gets provisional credit the next day. The interest rate is 2% per year.

Result: $500 × 0.02 × (5/365) ≈ $0.14 (14 cents of interest for 5 days)

For the purposes of computing the amount of interest or dividends payable with respect to an interest-bearing deposit account, a depository institution shall not delay beginning to compute interest on funds deposited by check or similar instrument to such an account beyond the date on which that depository institution receives provisional credit for the check or similar instrument. However, the payment of interest with respect to funds deposited by check or similar instrument which is returned unpaid shall not be required. (Added by Stats. 2011, Ch. 243, Sec. 3. (SB 664) Effective January 1, 2012.)

This law says banks must start calculating interest on money you deposit by check as soon as they get temporary credit for that check. If the check bounces, they don’t have to pay you interest.

Key Takeaways

•Banks must start paying interest on your check deposit as soon as they get provisional credit.
•If the check bounces, you don’t get any interest.
•Interest is calculated using the money amount, interest rate, and time it’s in the account.

Example

You deposit a $100 check into your savings account.

How to Calculate

Interest = Principal × Rate × Time

Find out how much money you deposited (Principal).
Know the interest rate (Rate) your bank gives for the account.
Count the days (Time) the money is in the account after the bank gets provisional credit.
Multiply these numbers to find the interest.

You deposit a $500 check, and the bank gets provisional credit the next day. The interest rate is 2% per year.

Result: $500 × 0.02 × (5/365) ≈ $0.14 (14 cents of interest for 5 days)

Key Takeaways

Example

How to Calculate

Key Terms

References

§ 1422 Interest On Deposited Checks

Key Takeaways

Example

How to Calculate

Key Terms

References

Key Takeaways

Example

How to Calculate

Key Terms

Related Statutes

References

Key Takeaways

Example

How to Calculate

Key Terms

Related Statutes

References