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‘Check 21′ changes make it easier to bounce checks



‘Check 21′ may sound like the title of a bad action-adventure movie, but it’s actually shorthand for “Check Clearing for the 21st Century Act,” a new law that may revolutionize the way checks are processed in this country.

This federal law went into effect Oct. 28 and allows banks to process ‘substitute checks,’ which are high-quality paper copies of your checks that can be sent electronically. These substitute checks are considered legal, negotiable notes, just like your original check.

But, since they’re sent electronically, they clear a whole lot faster than the old-fashioned system. The net result is so-called float time – those days you count on between when you wrote the check and when you assume it’s going to ‘hit’ your account – is virtually eliminated.

It may take awhile for Check 21 to take hold, however. The law does not require banks to either create substitute checks, nor accept checks in electronic form. It simply gives banks the option of pursuing such a system.

Furthermore, this process is somewhat expensive and labor intensive and some banks have announced they will adopt it slowly. So that means your traditional paper checks and the electronic system will co-exist for a time.

Still, with Check 21 there is a greater risk you might bounce some checks. And with check-bouncing fees running anywhere from $15 to $30 per check – not to mention any additional late fees that might be tacked on – bouncing a check is something you definitely want to avoid.

First, keep your checkbook up-to-date. If your bank offers online banking (or a call-in number to let you check your balance as well as recent debits and credits), check it every day or so to monitor your balance. And don’t write checks unless you have the funds in your account.

Second, don’t rely on ATM receipts to give you an accurate picture. They’re usually not up-to-date with your latest transactions, giving you the false picture that you have more money in the bank than you really do.

Third, keep tabs on the spouse. If you have a joint-checking account, it’s imperative that you share any check writing or debit card adventures … or you’ll find yourself on a very expensive banking adventure.

For details on the law and what it does and does not cover, visit the Federal Reserve Board’s Web site at www.federalreserve.gov/paymentsystems/truncation/faqs.htm.

For information on how to protect yourself, visit the Consumers Union Web site at www.consumersunion.org/finance/ckclear1002.htm. Here you’ll learn what to do if something goes wrong in your checking account as well as general banking tips.

Finally, to get the basics from a consumer’s point of view, visit BankRate at www.bankrate.com/brm/news/chk/20040924a1.asp.

Romi Carrell Wittman is a Tucson-based freelance writer. She has more than 10 years of experience in marketing, Web site strategy and corporate communications. She can be reached at r_wittman@cox.net.

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