How Checks Work
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Open a Checking Account
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When you open a checking account at a bank by depositing money there, you'll have checks printed up. You'll use these checks in place of cash. Every time you spend your account's money, the bank will keep track of the transaction, then send you a list of those transactions in the form of a monthly statement.
Check Register
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You'll keep track of transactions, too, by writing them in a check register, which comes with the checks. The register, then, is a written log of what is happening in your checking account at any given moment. You will compare the statement and log against each other every month to make sure they reconcile with one another.
Checks Arrive
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When you receive your printed checks, you'll see some familiar information. At the top, left-hand side of the check is your name and address. On the top, right-hand side you'll find a number sitting by itself. This is the number of the check. Looking through your checks, you'll see these numbers are sequential.
Fill in the Check
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In the middle of the check you'll see blanks for you to fill in. There are slots for date, the person or entity you're paying with the check (the payee), and the amount of the check, which you write out twice, once in words plus a fraction for cents and the other time as numerals.
Routing Number and Signature Slot
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On the bottom-right side of the check is a space where you will sign the check to make it official. It can't be cashed by anyone unless you sign it. On the bottom-left side of the check is a string of numbers. Reading from left to right on the string, you first have a routing number, a nine-digit code that refers to the bank where you keep your money. It allows the check to be properly routed to the right bank when it comes time for the check to be paid. After the routing number comes your account number. After the account number is the check's number.
Payee Receives Check
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Once you fill in the check, sign it and give it to the payee, the check will be cashed or deposited after the payee endorses (signs) the back of the check. The payee can take it directly to your bank and get money for it, which your bank takes from your account. The payee might, instead, deposit the check it in his own bank and let the bank take care of getting the money.
Banks Route Check
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It would be hard for every bank to process every check presented to it from a variety of banks in a variety of places. This is where Federal Reserve Banks come in. These banks act as intermediaries between banks, routing the check to the proper place for collection, while, in the meantime, crediting the payee's bank for the money. Once the Federal Reserve Bank presents the check to your bank, your bank takes the money from your account to give to the Federal Reserve.
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