Check 21 - Get Ready For Fast-Clearing Checks!

If we ever needed a reason to bone up on our personal finances, this is it!

CBS Marketwatch reports that banks in the U.S. will soon be able to process checks much faster than they have been. Check Clearing for the 21st Century Act, or Check 21, which goes into place on October 28, means that the "float time", i.e., the time from when the check was written to when the check clears, will become virtually zero. Customers have been able to use this float time to allow them to buy things and later make sure that the money is in their accounts.

Advocates for Check 21 say that this new process is more reliable and secure. They also say that the faster check clearing will allow banks to detect fraudulent checks and catch the bad guys who write these checks sooner.

Consumer advocates say that since the banks will clear checks sooner, but not make faster deposits to consumer's accounts, banks are the only beneficiaries. They also say that faster clearing of funds to cover checks will increase the number of "bounced checks" and the fees for these to consumers could rise by as much 20 percent.

As this process rolls out, check writers and their banks face a difficult adjustment period from the end of October through the end of December. Here are six tips for dealing with the new check-clearing rules:

1. Write only what you can cover
2. Check your statement more often
3. Request the new 'substitute checks'
4. Use direct deposit
5. Get an overdraft credit line
6. Use credit cards for larger purchases

Check out the companion article by Chuck Jaffe, entitled "Better Start Balancing The Checkbook"