DEFINITION of 'Check Clearing For The 21st Century Act - Check 21'

A federal law that took effect on October 28, 2004, and gives banks and other organizations the ability to create electronic image copies of consumers' checks. The images are then sent to the relevant financial institutions to be processed, where money from a consumer's account is transferred to the receiving party's account.

BREAKING DOWN 'Check Clearing For The 21st Century Act - Check 21'

This law aims to make use of technology to reduce or eliminate the costs involved with paper check processing. For example, the cost of physically transporting a paper check from one part of the country to another is far higher than the delivery of an image of a check across a secure network.

After a predetermined holding period has elapsed, banks may destroy the original paper check. However, not all banks do this and in some cases, consumers may be able to ask for their cashed checks back for record-keeping purposes.

RELATED TERMS
  1. Electronic Check Presentment - ...

    A process that allows financial institutions to exchange digital ...
  2. Substitute Check

    A paper reproduction of a check that is copied electronically. ...
  3. Electronic Check

    A form of payment made via the internet that is designed to perform ...
  4. Regional Check Processing Center ...

    A local Federal Reserve facility where checks that are drawn ...
  5. Check

    A written, dated and signed instrument that contains an unconditional ...
  6. Check Conversion

    A reformatting service offered by banking merchants. Check conversion ...
Related Articles
  1. Personal Finance

    Explaining Checking Accounts

    A checking account is an account at a financial institution, usually a bank, that allows for deposits and withdrawals.
  2. Personal Finance

    Top 5 Reasons Banks Won't Cash Your Check

    Learn the top reasons that a bank won't cash your check, and find out what steps you can take to prevent those scenarios from happening.
  3. Investing

    Demystification Of Bank Accounts

    Find out which type of account suits your specific needs.
  4. Small Business

    The Best Banking Services for Your Business

    Find out which banking services can offer a small business the best opportunities for reducing cost and fraud while managing its cash flow more efficiently.
  5. Personal Finance

    What is a Bounced Check?

    Bounced check is a slang term to describe a check that cannot be processed because its writer has insufficient funds.
  6. Managing Wealth

    2015's Top Checking Account Promotions

    Open a checking account in 2015 and the bank could give you a cash bonus. Check out these top offers.
  7. Investing

    What is a Cashier’s Check?

    A cashier’s check is a check written on a financial institution’s funds.
  8. Managing Wealth

    Top Premium Checking Accounts of 2015

    Which banks offer the best deals for premium checking accounts – and what do you have to do to qualify for one?
  9. Personal Finance

    10 Checking Accounts the Ultra Rich Use

    These accounts – created specifically for the wealthy – come with special extras such as personal bankers, waived fees and the option of placing trades.
  10. Personal Finance

    5 Useless Financial Products That Will Disappear Soon

    Bank deposit slip: what's that? Everyday tools of our financial life that went from indispensable to obsolete.
RELATED FAQS
  1. How do you calculate payback period using Excel?

    Understand the various fees that can be assessed on a personal or business checking account, and learn methods to avoid being ... Read Answer >>
  2. How long does it take a check to clear?

    It usually takes two days for a check to clear, but in some cases it may take longer. Discover how banks treat large deposits ... Read Answer >>
  3. In what ways has technology helped to reduce float?

    Learn more about the impact of float on the U.S. monetary system and how technology has changed the amount of float as measured ... Read Answer >>
  4. What US banks offer free checking accounts?

    Quit wasting money on monthly fees associated with your checking account and get a free checking account from reputable national ... Read Answer >>
  5. Why does float usually increase at the beginning of the week?

    Find out more about float and how checking float is created in the American banking system. Learn more about why the Federal ... Read Answer >>
Trading Center