Finality Of Payment

“Finality of payment” is a somber-sounding way of saying, “this transaction is complete.” Once we’ve paid for something and that payment goes through, the transaction is done and finality of payment has been achieved. The important thing to keep in mind here is that a transaction is final when a payment goes through, not when it’s initiated.

Let’s say we hire our buddy Brian to sit for our cat while we’re out of town. When we get home, we write Brian a check for the entire amount we owe him. Is this payment considered final? No. Not yet.

The next day, Brian goes to his bank and deposits the check into his account. Because the payment amount is so high—Brian’s a really good catsitter—the bank has issued a two-day hold on the check until they can verify the funds are available. Is this finality of payment? No. Not yet.

Two days later, the bank clears the hold on our check and the funds are finally available for use in Brian’s account. Now, this, friends, is finality of payment. The transaction is officially complete. We’ve paid in full and those funds are available for use by their recipient. And everyone, including the cat, is very happy.