Check 21 Takes Effect
Check 21, short for Check Clearing for the 21st Century Act, is a new federal law that took effect on Thursday and may have repercussions depending on how you have used your checking account in the past.
Check 21 allows banks and other financial institutions to exchange checks electronically, using high-quality reproductions of original checks instead of the paper checks themselves. Since the electronic checks can be transfered much quicker than the physical paper checks, this means that funds in your checking account will have a much shorter "float" period (the 1 to 5 day time period it takes from the time you write the check to the time the money is taken out of your account). This may cause people who were able to use the float to write checks without sufficient funds knowing they wouldn't clear until a few days later and after their next paycheck was deposited to now incure overdraft fees with the new system.
While Check 21 will reduce the time it takes your checks to clear, banks won't don't have to reduce the "holds" they place on checks you deposits. Those holds can range from a day to more than two weeks, depending on your bank policy and the type of deposit. This again can increase customer banking fees if money you thought was avaiable is still being held. While the hold times should also eventually be reduced from Check 21, the Federal Reserve Board will not take up this issue for another 2 1/2 years.
Customers are not likely to see an immediate effect. Many banks and financial institutions still haven't implemented the technology to start processing check images electronically and the changes will likely take place over an extended period of time.
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