Clearing checks refers to moving money to finish a transaction made through a check. The process may take several days; however, in certain instances, it can be faster. In the end, it depends on how the person receiving the payment handles the payment, the type of payment they are, and other variables.

Moving Funds Between Banks

In most instances, the person receiving (or the payee) will submit the check to the bank of their choice, and the bank will then take the money from the bank that wrote the check. This process typically takes about two to three days; however, it could take longer in the case of international payments or other unusual circumstances. Intermediaries such as correspondent banks, Federal Reserve banks, and Federal Reserve often assist with these transactions.

Internal Payments and Check Cashing

Sometimes, funds move quickly. For instance, if the check writer and payee are both in one bank, transfers within the same institution are quicker (moving within a single business day, for instance). If you pay a check in the bank that wrote the check, the money is withdrawn from the account in a matter of minutes. If everything goes as planned, the process will be smooth. However, depending on your viewpoint, the timing may be a challenge:

• If you've been given the check, you're likely waiting to have it cleared.
• If you've written the check, you may wait a few days to deposit the money in your account.

Logically, the institution, such as a credit union or bank (where the payer deposits and cashes the check), forwards checks to the institution it is drawn upon or to a clearinghouse. Banks originally issued checks in physical form to one another; however, they now use images of the checks to increase efficiency. If funds are in the bank and there isn't an issue with the check, the bank that pays it transfers funds to the bank that will receive it.

Checks You Write

How long will it take for the check to be cleared after you've written it? The answer is contingent on a variety of aspects. In most cases, the checks are deposited into your account two to three days following the recipient's receiving the payment. If the check isn't cleared, the account, it's essentially an IOU--a promise that you may not honor. However, the timeframe for clearing has been shortened following the Check 21 Act, which allows banks to process more checks electronically. The Act became effective in October 2004.

Consider Money Spent

When you write a check, behave like the money is not in your bank account. In the past, people used to record every transaction on check registers. Balance your accounts for checking (whether in electronic or paper format) is a good procedure.

Float Time

You may be used to waiting for a few weeks (or longer) until you see the money disappear from your account. The check is termed "outstanding," and you could be tempted to use the funds for something else, but that's two times the amount, engaging in fraud and putting yourself at risk for overdraft charges. Utilizing the same money repeatedly while waiting for the check to be cleared is known as "taking advantage of the float" and could cause various issues, including bounced checks.

Checks You Receive

If you've received a check payment, You're probably excited to use the cash. It could be that you require it to cover expenses, or you may be concerned regarding the check's bounce. What's the time frame you need to wait until the check clears?

"Available" Does Not Mean "Cleared"

If someone writes you an official check, it is "cleared" as soon as the bank of the person who wrote the check transfers the money to your bank, and you can use the money. But, it's not always specific when or if the check will be cleared. The bank will often allow the use of funds from your deposited checks or even withdraw cash before the check clears.

Risk Is Yours

You are responsible for the deposits you make, meaning you'll need to repay any money you've used in the event the check bounces once you've used the money. A federal statute (Regulation CC) stipulates that banks provide at least a portion of your deposit accessible at the earliest couple of days. For many transactions, including individual checks, the initial $225 will be available within one workday (if it is not available immediately), while the rest is available a few weeks after. Banks can offer higher amounts for other products, including government-issued or cashier's checks and USPS cash orders.