Ready for Faster Check Cashing?

Oct. 26, 2004 -- -- Consumers who rely on the float period (the lag time between when a check is deposited and when the funds clear) to get by every month are soon going to find themselves out of luck.

Starting Thursday, a federal law called Check Clearing for the 21st Century Act or Check 21, will allow banks to process checks without any lag time.

Check 21 was originally proposed after Sept. 11, 2001, when physical copies of checks could not be delivered to banks because air traffic was grounded.

Similar to an airline using an e-ticket as opposed to the standard paper ticket for your receipt, your checking account will now function the same way. Instead of relying on the paper receipt of a check, a bank will now be allowed to convert the check into a digital image and process it electronically though its system.

Once the new systems are in place, checks that used to take a day or more to clear could go through in less than 24 hours. Here are the basics on Check 21 and how you can avoid getting burned by the bounce:

With Check 21, if there are insufficient funds in an account at the time a check is written, your check will likely bounce and you will be charged an overdraft fee of $20 to $35 per check. In fact, Check 21 could cost consumers more than $170 million in fees every month or more than $2 billion a year, according to Consumers Union.

Check writers who previously received their original canceled checks in the mail will lose this benefit, as banks are no longer required to return or preserve them.

However, if you require a paper copy, you can request a "substitute check," which is generated from the electronic image of the check and the payment information.

A substitute check will contain the statement: This is a legal copy of your check. You can use it the same way you would use the original check.

It is considered legal proof that a payment has been made.