What is Check 21?

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What is Check 21?

Check 21 (the Check Clearing for the
21st Century Act) allows banks to
replace original paper checks
(source document) with digital
copies of the originals.

Why was Check 21 created?

Check 21 will reduce the time, risks
and costs associated with paper
check processing. Banks will be able
to send digital images of checks
electronically, eliminating the need
to physically transport paper checks
between banks. Clearly there will
be substantial costs and time savings
to the banks.

What is a substitute check?

A substitute check is a paper copy of
the digital image of your original check,
called the source document - both
front and back, with all endorsements
-and is about the size of a business check.
Check 21 legislation standardizes
quality and allows for substitute checks
to be legal copies of the originals.

Are substitute checks an acceptable
proof of payment?

Yes, everyone must accept substitute
checks beginning Oct. 28.

How will Check 21 impact me?

DO NOT count on float time for your check
to clear. Funds will be removed from your
bank account much sooner than a paper check.
If you receive your canceled checks with
your statement, you may receive a mix of
substitute checks and original checks.
If you don't receive your checks back
now, you may not notice any change. Check
processing will be faster with the
implementation of Check 21. Funds may be
removed from your account sooner than
in today's system.

What happens to my original check?

After making a digital image, the bank
may destroy your original check. If
necessary, a substitute check may be
created. Since substitute checks are
legal copies of your original check,
there is no need to save the original.

What if I need a copy of a canceled check?

Your bank will produce a copy for you.

How does Check 21 relate to electronic
check conversion (e-check)?

Check 21 involves creating digital images
of original checks, but are still
processed under the same laws and
regulations as paper checks. On the
other hand, electronic check conversion,
or e-check, occurs when a check is
converted into an electronic funds
transfer. The transaction is then routed
through the Automated Clearing House
(ACH) network.

Who wins?

THE BANKS! Banks will be saving big dollars
on their operational costs. Merchant may
see faster funds availability but many
were already seeing quick funds availability
using paper checks. Consumers lose the float.
So "suprisingly" the banks are the real
winners.

For more information visit
http://www.aba.com or http://www.nacha.com

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