What is Check 21?

You've probably heard the term "Check 21" mentioned before. Perhaps you've wondered what it was all about and how it might affect you. This article will answer those questions.

Also known as the Check Clearing for the 21st Century Act, Check 21 is legislation that was put into action in 2004. The law allows banks and credit unions to use electronic/digital images to process and clear checks instead of being forced to use a physical paper check.

Basically, that means if you cash a check at your bank it can be scanned into a computer and processed, or re-printed on paper to create what's called a "substitute check." The scanned image is often sent electronically to a different branch used as a processing site.

Check 21 makes digital images and substitute checks legally acceptable forms of payment.

Before Check 21, financial institutions had to use the original paper check before a payment or deposit actually happened. That meant transporting the check using the postal service or some other means of physical delivery.

Part of the reason for the Check 21 legislation was to keep the U.S. financial industry up and running in the event of a catastrophe or terror attack.

Check 21 does not require all banks to accept digital images instead of paper checks. However, it does require all institutions accept substitute checks created from such an image.

For the average person, Check 21 means checks are processed faster and more efficiently. In addition, it has resulted in better service within the banking industry because bank employees can easily update customers on a transaction by accessing digital information.

The act also means checks will remain a viable payment option for years to come because it is now much easier for banks to process paper checks.

All business checks and personal checks printed at Check Advantage are examined to ensure they meet readability standards that are compatible with image processing technology. That means your checks are guaranteed to process in your bank's equipment.