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. Electronic Check

    A form of payment made via the internet that is designed to perform ...
  3. Substitute Check

    A paper reproduction of a check that is copied electronically. ...
  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

    How to Cancel a Check

    If you've had a personal check lost or stolen, the next best step is to cancel the check by calling your bank and putting a stop payment on the check.
  2. Investing

    A Guide to Bank Accounts

    Find out which type of bank account suits your specific needs.
  3. 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.
  4. Investing

    What is a Cashier’s Check?

    A cashier’s check is a check written on a financial institution’s funds.
  5. 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?
  6. 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.
  7. 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.
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. When do checks expire?

    There is a legal grace period for cashing checks, but depositors and issuers may risk overdraft fees if a late check is presented ... Read Answer >>
  3. 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 >>
  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 >>
Trading Center