Credit Wise
(featured column)
Without
the Check Float, Some Consumers May Sink
by Jennifer
Delcamp
If you are one of those consumers who writes
checks and prays that you get to the bank with a deposit before they clear, you
may need to rethink your risky check writing behavior. This month, a new law
affecting consumers will go into effect. Check Clearing for the 21st Century or
“Check 21” affects the way financial institutions handle checks.
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While this may mean complicated procedures for financial institutions, consumers really need to understand two basic things about how it will affect them. First, banks will no longer return original paper checks to consumers. Instead, banks will make substitute checks, process checks electronically, and deliver substitute checks to banks who want paper checks. If you like to receive your paper checks back each month, you will now be receiving substitute checks instead. Also, some banks may charge more to return the paper substitute checks.
Second, checks will clear faster. The “float” period between when the check is written and when it clears the bank will be much shorter. Checks will be processed electronically so they’ll go through the clearing process much quicker. If you usually write checks early in the week hoping they don’t clear until you get paid later in the week, you may be in trouble.
If you rely on the check float, don’t let the new law sink you financially. Here are some tips to help you adjust:
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Balance Your Checkbook: It will more important than ever to know how much money you have in your account. A year’s worth of checking account statements unopened can hide a lot of service fees that you may have forgotten about. If you aren’t sure how to balance your checkbook, call your bank for help. Many of them offer classes in conjunction with financial education organizations to help you learn to keep an up-to-date checkbook.
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Get Organized: If you are living paycheck to paycheck and constantly paying bills late, it’s time to get your finances under control. Learn some
money management skills to help you pay ahead instead of juggling the bills. Relying on a few days in between the time a check is written and clears is risky anyway. Now that the option will no longer be available, it’s more important than ever to really get your finances in order.
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Don’t Write a Check Unless You Have the
Funds in Your Account: While the check won’t be cleared instantly, it will be much faster than in the past. Make sure when you write a check that you can cover it. Returned check fees from the bank average $35.00 and that’s in addition to the $20.00 fee that many retailers charge. A $5.00 check that bounces can easily cost over $50.00 by the time all of the fees are paid. That’s not even mentioning that some states actually prosecute for bogus checks, which can cost much more in legal fees.
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Don’t Panic: While it may mean a lifestyle change for some, many consumers won’t notice a difference. If you currently receive your original cleared paper checks and want that to continue, talk to your financial institution about receiving the substitute checks. |
For some, technology is a blessing and a curse and this is just another example. For a few years now, some retailers offer the option of just signing the paper check and they complete it for you. That’s because they are processing the check electronically. This is no different than that option. The good news is that it may take some financial institutions a while to get all of the technology into place to process the checks electronically. However, it’s smart to plan ahead and make sure you are managing your checkbook well so that returned check fees don’t sink you financially.
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Copyright
© 2004 by Jennifer Delcamp
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