Show #279 Airing Sunday, January 9, 2005
Check this out: The government has just made it easier for you to bounce a check. And as you may already know, bouncing a check can be costly!
Have you ever written a check knowing that you didn’t have enough in your account to cover it? I’ll bet you have. Come on. Maybe you wrote a check on Monday, knowing that Tuesday is payday and then you could deposit the necessary funds to pay the check. Or maybe you just needed to move some money from savings to checking to cover the check. This works, because it usually takes two or three days for the check you write to clear your account.
Why do you get extra time to put funds into your account to cover a check? It’s because, when you write a check, it must pass through many hands before the money is taken out of your account. Let’s say you write a check at the department store. The store would deposit the check into its bank account. The store’s bank would then send your check to the local Federal Reserve Bank. Then, the Federal Reserve Bank would send the check to your bank. This process, sending the checks by mail from one place, to another, to another, would typically take two or three days.
But a new law is changing and speeding up the check handling process. The law is called Check 21. Instead of sending your actual check through the mail from one bank, to another, to another, the bank now may scan your check into its computer, then send an electronic copy.
Transmitting a copy of your check electronically, instead of by mail, will be a great time saver. Under the new law, when you write a check, it could clear your account almost before the ink is dry!
So when you write a check, you’d better have the money in the account to cover it. Otherwise, it’s likely your check will bounce faster than a LeBron James breakaway.
Oh, you should also know that the fast forward button only works on what’s going out of your account. Checks deposited into your account won’t clear any faster. So let’s say you deposit your paycheck into your bank account today. Can you write checks on your account the same day? It used to be okay to do that. It took a couple days for the money to get into your account after you deposited your check, but it also took a couple days for checks you wrote to clear your account.
Now, checks you write on your account will clear promptly. But checks you deposit into your account, like a paycheck, may still take a couple days to add money to your account. That’s because banks can still hold your deposits for a couple days.
The new law speeds up the process when you write a check. This will save banks money. It’s more expensive mailing checks than transmitting them by pressing a button on a computer. In fact, experts predict banks could save billions of dollars. But the new law will cost you money, if you bounce a check because you didn’t check out the new rules.
