When you get your bank statement at the end of the month, you get a list of things that have come in and out of your account. These items include deposits, transactions in which you used your debit card and checks that have been deposited or written from your account. If not all of the checks you've written appear in the list, this means they are still in the process of clearing.
A cleared check has successfully completed the banking process so that the payee has received the funds.
Check Clearing Definition
Cleared, in regards to a check, means it has gone through the complete banking process:
- You wrote a check for the mortgage.
- The mortgage company deposited the check into their bank account.
- The mortgage company's bank presented the check to your bank for payment.
- Your bank checks your account balance, sees there's enough in the account to honor the check and pays the mortgage company.
- On your bank statement, this check is listed under "Cleared Checks."
The process from the moment you wrote the check to the point where the mortgage company's bank presents the check for payment varies. For companies that make daily deposits, the process could take 2-5 days, longer if companies only deposit on certain days. The process is also quicker if you and the company you wrote the check to both use the same bank. If you wrote a check but it doesn't appear on your bank statement, it's likely still going through the check clearing process.
Checks that Clear Immediately
There are cases when a check will be presented to your bank immediately. For example, if you go grocery shopping and hand the cashier a check for payment, many stores can scan the check through their system and get an immediate response from your bank regarding whether or not to honor the check. In many ways, the check is treated like a debit card transaction.
Floating Checks Are Now History
Before check clearing became an almost instantaneous thing, a person could write a check on Wednesday, and even though they knew they wouldn't get paid until Friday, they didn't have to worry about the check bouncing because it would take longer than those two days for the check to make it back to their bank for payment. In the opposite direction, people cashing a personal check with insufficient funds could count on the check taking a few days to hit their bank account. This time period was called a float.
With the improvements in check processing, however, depending on a float to keep you from bouncing a check became a dangerous proposition. It was already an illegal activity, but people were willing to risk it if it meant they could get groceries or pay the electric bill on time. However, in this day and age of checks clearing instantly, floating is almost a thing of the past – and still illegal.
Depositing a fake check consequences (which could include writing a bad a check) can range from a fine to jail time, depending on the amount of the check and the state.
What Happens to the Cleared Checks?
Cleared checks are handled in several ways, depending on the bank. Some banks send paper checks that have cleared back to the customer along with a paper statement or by themselves if the customer receives online statements. Other banks scan the checks into their system and send images of the cleared checks electronically to their customers. In most cases, check are stored for a short period of time and then sent to be destroyed by a document company.
Whether you write checks or send them electronically, it is important to note that you should never write a check for more money than you have in an account. This can lead to check fees and overdraft charges if you have overdraft protection. And since cleared checks happen almost instantly, racking up hundreds in fees for one check seems like a risk you'll want to avoid.