Say Goodbye To The Check Float

[jeffrey]

If you're in the habit of playing beat the clock with your checking account, it's time to change your ways. Soon, the financial two-step known as the "float" will be much harder to pull off.

The "float" is the one- to five-day window between the time you write a check and the time the money is withdrawn from your account. Floaters use this time lag to give themselves short-term, interest-free loans.

But a new law that takes effect Oct. 28 will eventually sink the float. The law, known as Check 21, will allow banks to transmit images of checks electronically. Now, about 40 million paper checks a year are transported by trains, planes and trucks for processing, which is why it may take up to five days to clear an out-of-town check.

With electronic processing, "Checks are definitely going to clear faster than they have in the past," says Ed Herman, a director at EDS, a third-party check processor.

Banking industry officials say the change will make the system less expensive, more efficient and less susceptible to fraud. The impetus for the change was the Sept. 11 terrorist attacks, which disrupted transportation for several days throughout the country. After the attacks, the Federal Reserve Board pushed for changes that would make the country's financial system less vulnerable... [read more at usatoday.com]