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Checks and Balances: New Check 21 Law
Changes are coming that will make it more important than ever to actively manage your checking account. You may already have received a notice or brochure from your bank regarding the “Check 21 Law,” short for the Check Clearing for the 21st Century Act. This law, which went into effect on October 28, 2004, allows money to move faster and financial institutions to produce substitute checks.
For those of us who bank at an institution that already sends images of checks with our bank statements, there isn’t going to be a significant change. However, if you still have your checks returned with your statement, this will come to an end. Some grocery stores have already initiated electronic scanning. This happens when you write a check; the cashier scans it and returns your check back to you. This creates an immediate debit to your account. Take note that gone are the days when you thought you could write a check, knowing that it might take a few days to clear, giving you time to make a deposit.
A significant amount of paper reduction has been documented as a result of consumers using debit cards, ATM cards, on-line bill paying services and direct deposits. More reduction is on the way.
The check that you mailed won’t be making its way to several destinations via mail before it gets returned to your bank. It will pass through an electronic system much quicker. Of course, there are utility, phone, cable, insurance companies who encourage customers to pay their bills through automatic withdrawals. This new law does not mean you have to change the way you pay your bills. You can still write checks. What it does mean is that money will move faster. It will lessen the time you have to wait for deposits to clear. Financial institutions have, in the past, been able to hold deposits before making the money available to protect themselves against bad checks. It also means that if the financial institution makes an error by either withdrawing unauthorized funds or by not crediting your account properly, it can be fixed quickly.
If you need proof of a payment, you can request a substitute check with endorsements to provide proof of payment. The substitute check is the legal equivalent of the original check. Remember to review your bank statement monthly. Most banks give you 60 days to notify them if you find an error.
Also, remember to enter into your check register any debit or ATM withdrawals.
Changes and new choices in your life as a bank customer can be unsettling or confusing, but you can make the most of the situation by being informed and proactive. If you have a question or concern about your checking account or the different ways to make a payment, contact your bank. If you would like more information regarding “Check 21”, click onto www.fdic.gov
If you need help sorting your mail, balancing your checkbook and/or budgeting, please call Elder Services at 413-499-0524 or 1-800-544-5242 and ask for the Money Management Coordinator.
(Reprinted in part from Federal Deposit Insurance Corporation (FDIC) Consumer News.)
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