How Check 21 Works
Check 21, more formally called "The Check Clearing for the 21st Century Act," is a federal law that went into effect Oct. 28, 2004. It allows banks to transmit paper checks in electronic form to process them more efficiently.
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Process
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Banks take pictures of the fronts and backs of checks. They transmit the pictures, along with associated payment information, electronically. This eliminates the time and expense of physically sending the paper checks to the receiving banks.
Paper Checks
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If a receiving bank requires a paper check, it can create one from the electronic pictures and payment information it received. This recreated check is called a "substitute check." If your bank returns your canceled checks to you, it may send you substitute checks instead of the originals.
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Speed
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Checks sent electronically will probably clear faster than paper checks that are physically between banks. To keep your checks from bouncing, you should make sure that at the time you write them, your account contains enough money to cover them.
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References
- Photo Credit bank image by Pefkos from Fotolia.com
