Keeping your check book balanced is very important.
Years ago, you could write a check and be able to
anticipate several days passing before the money was
withdrawn from your account. This was called 'float'.
Things are different nowadays. The Clearing for the 21st
Century Act, or Check 21, took effect in October 2004
and has modernized the procedure of check processing.
How does Check 21
Suppose you write a check to pay for your car loan.
Your creditor can turn the paper image of the check into
an electronic one, speeding it through its system. The
creditor does not have mail your check to their bank,
which then would mail it to its regional bank and then
to your bank in order to receive your payment.
Not only does Check 21 save banks a great deal of money
in processing and transportation costs, it helps
circumvent occurrences when transportation grinds to a
complete stop as a result of bad weather, or even worse,
situations like 9/11.
Are there any potential problem for consumers and the
Check 21 system?
Not all creditors utilize the Check 21 system. As a
result, you will not know which checks were converted
into electronic images until you get you statement.
Therefore, relying on the couple of days 'float' offers
is not a good idea.
If you like maintaining a
balance in your account that covers the amount you write
in checks, then you won't have to worry about float.
However, many consumers are not as financially secure,
living more close to the edge. This often results in
What are substitute
In the past, banks gave their customers the choice of
receiving their canceled checks with their statements.
Nowadays, it not required for banks to do this. In fact,
customers can not demand the return of their cancelled
checks. If you are involved in a dispute and need a copy
of your original check to support payment, you will have
to request a substitute check from your bank.
Substitute checks are new negotiable instruments
implemented by the Check 21 law.
A substitute check means that your original check is
made into a paper reproduction. It contains images of
the front and back of your check and includes that
statement "This is a copy of your original check. You
can use it the same way you would use the original
check." Substitute checks can be used as your
verification of payment even in the court of law.
What does re-crediting my account mean?
If there is every a problem that can be tracked back
to a substitute check, you are protected by the Check 21
law. This can be an incorrect charge as a result of an
illegible amount from your original check on a
substitute. Also, it common for your account to be
double-debited. This means that the funds from your
original check are deducted from your account and then
deducted again as a result of the creation of the
substitute check. Regardless of which situation pertains
to you, you are entitled to an "expedited recredit."
The Check 21 law states
that your bank must either prove that the charge is
valid by producing a copy of the original check that
correctly represents the check, or credit your account
the full amount if the find your claim to be valid.
Exceptions will be made
when there is fraud involved or if the account is new.
What about check-hold times?
One of the main disparagements of Check 21 is that
checks you deposit do not clear any faster. Many
consumers complain that as a result checks are bouncing
and fees are being imposed because of non-sufficient