The Check Float Floats Away

[Valerie S. Johnson]

By Valerie S. Johnson

Back in the last century, you could live paycheck to paycheck a little easier by means of the float. You wrote a check before you had enough money in the account, knowing that your imminent deposit would hit before the check did. Your physical check had a journey to make from the recipient’s bank back to your bank, and this took a few days. Using the float is also known as “check kiting” and is illegal under both Federal and state laws.

In 2004, the laws changed and the Check Clearing Act for the 21st Century, known as “Check 21,” checked in as the new rule in the banking world. This system was designed so that banks could process checks faster electronically. You didn’t think it was for your benefit, did you? In fact, banks no longer have to return your canceled checks with your monthly account statement. They send imaged checks or perhaps nothing at all unless you request a copy of a specific check.

The latest evolution to speed up the banking process is called “back office conversion.” If you write a paper check in a retail store, the merchant can convert your check into an electronic payment. It’s not as fast as a debit card which vacuums the funds out of your account instantly. However, you can no longer count on the float to tide you over until you have sufficient funds.

[fairy74]

Ah yes, in the bad old days I remember my parents discussing how many days it would take a check to get processed and if the paycheck would be deposited before that time....well, this is actually probably a good thing as it forces people to only spend what they have right now.

[veronak]

I am actually happy that check 21 was passed, because I balance my checkbook almost daily and can't stand pending checks.