Check 21 Speeds Checking, Sinks Float

If you think you can get away with a little float, think again. It used to be tempting to write a share draft/check without actually having the funds in your account to cover it–until now.

The Check Clearing for the 21st Century Act (Check 21) will cut the time it takes a check to clear from days to hours. So if you need to change your checking habits, do so now before it’s too late.

Check 21 was signed into law on October 28, 2003, and became effective October 28, 2004. It’s designed to foster innovation and efficiency in the payments system by reducing some of the legal barriers to check truncation. Truncation means removing an original paper check from the check collection or return process, just as credit unions successfully have done for years. Supporters say it could reduce the cost of trucking and flying the paperwork cross-country by $2 billion a year.

The law eases the electronic exchange of checks by making electronic check processing voluntary and not mandatory. The law mandates that all institutions accept a substitute check (the paper copy of an electronic check file), but doesn’t mandate that all financial institutions accept electronic checks.

The bottom line: These changes should be transparent to you most of the time. If your checking habits need improvement, brush up–before the float sinks.