![]() It’s a good practice to confirm that a check has cleared before spending it. ![]() Your financial institution may allow you to spend a portion or all of that deposited check, but if it bounces, you would be the one responsible for repaying any funds you used before the check bounced. If you’re the check receiver: keep in mind that when you deposit a check and the money shows up in your account, the check may not have cleared yet. With today’s technology and electronic clearing processes, funds can be immediately held from your account when your check is scanned. If you’re the check writer: it’s best to pretend that the related amount of money is gone from your account the moment you write your check. The introduction of mobile check imaging (also known as remote deposit capture) and other technologies is helping to shorten the holding period however, to avoid fees, bad checks and other sticky situations, it’s still important for you to understand what the holding period is at your credit union or bank. It involved clerks from each London bank meeting up at a tavern on Lombard Street to exchange checks and settle account differences-not the most scalable process! In 18th century England, the check clearing process was considerably less efficient. The financial institution makes sure the check-writer’s account has sufficient funds to make the payment-if it does, the transaction goes through, but if the account has insufficient funds to complete the transaction, the check bounces.Ĭheck clearing might sound like a long and overly complicated process, but it has come a long way. That data is then sent to a clearinghouse, which forwards the information to the financial institution that issued the check. Then the physical check is fed through a machine that scans its data. First, the financial institution that receives the check for deposit encodes its dollar amount into the machine-readable numbers along the bottom of the check. The clearing process itself is made up of several steps. This is referred to as a holding period, and it can vary anywhere from a day to over a week, depending on your financial institution. Holding periods exist, and you need to keep track of themĬhecks often get a bad rap for the amount of time they take to clear. Whether or not checks are on their way out, there are still a couple of check-related best practices that you need to be aware of in order to stay on top of your finances. ![]() Writing checks continues to walk the line between permanence and obsolescence. We still keep our money in checking accounts, we still balance our checkbooks, and new banking technologies (mobile check imaging is one example) are being introduced to improve the process of paying by check. However, despite their gradual decline in use, checks haven’t become completely extinct. (Can you imagine whipping out a checkbook in line at the grocery store? Times have certainly changed!) This is vastly different from only a few decades ago, when checks represented more than 85% of all non-cash retail payments. We maybe write one or two checks a month (usually for rent or similar bill-paying situations where electronic payment simply isn’t an option). In many ways, checks seem like relics from a previous era. Checks hold an odd place in our personal finances.
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