Check 21 FAQ
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Check 21 FAQ

Q: What exactly is Check 21?

A: Check 21 is a federal law that was passed on October 28, 2004 which is designed to speed up the check clearing process for financial institutions. Although the law was passed in 2004, banks are not, at this time, required to process all checks according to the Check 21 law. The law simply gives them the opportunity to clear checks quickly; it does not require it at this time.

Q: But what exactly does that mean to me as a check-writer?

A: What this means is that anyone who writes a check should have funds in their account prior to writing that check. Since nobody knows exactly which institutions currently use Check 21, you never know if a check that you write that usually took a week to clear could clear within a few hrs or a few days.

In the past many people would do what is called "floating checks." Floating checks is when someone would write a check knowing that they didn't have funds in their account currently, but by the time the check travels halfway around the country to clear and process through their account, the funds would be available. Some people get away with this; I am a witness to tell you that many people do not. What most people don't realize, however, is that floating checks is illegal. So, please, don't cry to your institution that they are being unfair by charging you a fee to clear your checks before your deposit arrives.

Furthermore, some have taken advantage of the float by "check kiting." Kiting checks is done by writing several checks on several different banking accounts and depositing some of those checks to cover other checks you had written from each different bank account. As you can imagine, check kiting gets very complicated and more often than not, those who kite are unable to keep up. This too is illegal, of course. One reason Check 21 was passed was to attempt to stop check floating and kiting.

Q: Since checks could clear sooner through my account, does that mean financial institutions won't hold my check deposits as long?

No. Although Check 21 may eventually cause financial institutions to loosen the grip on their check hold policies, the Check 21 law itself does nothing to change check holds. Generally, banks can hold local checks for up to two business days, out-of-town checks for up to five business days, and other types of checks (e.g., checks over $5,000, checks drawn on new accounts, checks written against consistently overdrawn accounts, etc.) for up to thirty business days. You must keep this in mind when depositing checks. You want to make sure that funds are not only deposited into your account, but also that they are fully available before you write checks.

For more information on Check 21, please visit:
Frequently Asked Questions about Check 21