How Are Checks Paid?
Some say money makes the world go round. Of course, that money isn't always cash. The check is a long-standing means of settling debts.
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What is a Check?
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In simple terms, a check is used in place of money. Unlike a credit card, which pays for goods and services that are later billed to the user (often with interest charges), a check requires a person to have actual funds available for withdrawal from a bank account.
Checking Accounts
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The funds that validate a check are kept in a checking account at the writer's bank. The amount of money she can write a check for is proportionate to the amount of money in the account.
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Clearing a Check
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When a check is written, the recipient turns it in to receive payment. The money is deducted from the writer's account and delivered to the recipient. When the transaction is complete, the check has "cleared."
Bounced Checks
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When a check is written for a sum that the writer's account cannot cover, her check "bounces." A bank will sometimes pay the recipient of the bounced check and deduct the value from incoming deposits the writer makes. A fee is usually also applied.
Check Cards
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In recent years, check cards have grown in popularity as a replacement for paper checks. These cards are linked directly to the user's bank account, and allow her to pay for purchases without writing out a check.
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