When you write a check to pay for goods or services, it is important that you track that expense in your check register received from Pure Checks. You should consider the money gone from your account the moment you give that check to the payee. When the payee of the check presents the check to their bank for processing, your bank will clear the check and the money is taken from your account and given to the payee’s account.
While this may seem like an easy process, there are often times things that can go wrong, which is why it is important to understand exactly how checks clear the bank.
It may take days for a check that you write to actually clear your bank. For this reason, it is best to consider the money gone from your account the moment you write the check. While the check is going through the check process, the check is considered outstanding by the bank. This simply means that there is a check out there that has not been processed. If you use the money for another purpose before the check has been processed, you are considered to be taking advantage of the float. Taking advantage of this float can get you into trouble, such as bouncing checks or writing bad checks.
For banks that still process checks manually, there is a float, which can be several days. However, the majority of banks today process checks electronically, which allows checks to clear much faster. When a check is presented to the bank, it clears when the money is withdrawn and deposited into the payee account. Issues may occur when you deposit a check and the bank makes a portion (sometimes all) of the check available immediately. If you spend that money before the check actually goes through the clearing process, you may find yourself in a situation where you will need to pay back that money, or your account will become overdrawn.
When making a deposit, if the check does not clear the paying bank, then your bank will take the money back – but you have already spent it! It is best to talk with your bank and understand their check clearing process. You should be 100% certain that the check has cleared before you spend the money, saving you lots of aggravation later. In addition, do not rely on the float and spend money that you have already promised to someone else via a check written.
While it is not difficult to understand how a check clears the bank, it is important that you know how the process works, and more importantly how your bank handles clearing. Knowing this information will save you fees and problems with your own personal account.