Newspaper article THE JOURNAL RECORD

Computer Tape Rapidly Replacing Banks' Paper Checks / Automatic Clearing House Grows 25% during Last Year

Newspaper article THE JOURNAL RECORD

Computer Tape Rapidly Replacing Banks' Paper Checks / Automatic Clearing House Grows 25% during Last Year

Article excerpt

If your paycheck is deposited directly to your bank or savings account, chances are good that your employer never even issues a check.

In fact, your money may be handled entirely by 1600 bits per inch magnetic computer tape.

Automatic clearing house entries are a rapidly-growing replacement for paper checks, according to Robert W. Allen, assistant vice president for the Federal Reserve Branch Bank in Oklahoma City.

The process works this way: a business gives its bank a list of employees, their banks and account numbers, and amount to be paid.

The bank compiles a magnetic tape with the information and sends the tape to the city Federal Reserve branch. The Fed then sorts out the entries, and debits and credits the accounts of the employees' banks.

Each bank receives either a tape or a printout, depending on its equipment.

Automatic clearing house began slowly in 1974, said Allen, and is growing rapidly - over 25 percent during the past year.

At the Oklahoma City Federal Reserve, approximately 50,000 transactions, or $20 million, are handled that way per day. At the same time, the branch goes through roughly one million checks, or $420 million, per day.

"Ten years ago, everything was checks," Allen recalled, but the check clearing procedure is timely and expensive.

Besides payrolls, automatic clearing house entries are used to handle utility bill payments, health club dues, social security payments, mortgage payments, and insurance premiums, Allen said.

Banks are charged 1 cent for each entry that is totally in Oklahoma, and 1.8 cents for entries crossing into another Federal Reserve zone, he added.

Currently, 20 Oklahoma financial institutions are able to originate automatic clearing house entries. Allen explained that an expensive computer software package is necessary to produce the tape.

In contrast, about 320 institutions receive account information transmitted automatically, he added. …

Search by... Author
Show... All Results Primary Sources Peer-reviewed

Oops!

An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.