Check Processing
Once you've paid for your groceries by check, the first place that check goes is to the grocery store's bank, where it is deposited. The funds may not be immediately available, unless you and your grocery store use the same bank (about 30 percent of checks are drawn on and deposited into the same bank), in which case the processing, or clearing, is handled internally. Otherwise, the grocery store's bank will probably want to verify the check with your bank, the paying bank, before it converts the check value to cash. But most banks do not communicate with each other directly; instead, they go through a middle man, an intermediary bank (Federal Reserve Bank, correspondent banks, and clearinghouse corporations). Reserve banks handle about 27 percent of US checks while correspondent banks and clearinghouse corporations handle about 43% of US checks.
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The grocery store deposits your check in its bank. The grocery store's bank passes your check, along with a payment request, onto an intermediary bank for verification and settlement. The intermediary bank identifies the paying bank. Having identified your bank as the paying bank, the intermediary bank presents your bank with the check you wrote, along with a payment request. If your bank agrees to pay, the check has been verified. The intermediary bank proceeds to settle the check, debiting your bank and crediting the grocery store's bank for the value of the check. Your bank debits your checking account. At the end of this process, the grocery store has full access to the cash value of the check you wrote. And at the end of the month, when your bank statement arrives, that check is right back in your hand or printed on your statement.
Not quite as simple as you thought, huh? Turns out keeping track of all that paper is a pretty complicated procedure. An estimated 70 billion checks are written each year in the United States alone. This means that about 270 million checks are processed every business day. Can you even begin to imagine how many checks that really is? A stack of 270 million checks would be approximately 90,000 feet tall or 17 miles high. By comparison, the tallest building in the world, Burj Dubai, is only 2,684 feet tall. A stack of 70 billion checks would be approximately 7 million feet tall or 1,347 miles (about 40% of the distance across America). The deepest known point in the ocean, or the Earth for that matter, is at the bottom of the Mariana Trench. The deepest point referred to as the Challenger Deep, plunges to a depth of nearly 7 miles. That is a ton of checks!
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