In response to changes in technology and efficiencies associated with electronic check exchange, the Check Clearing for the 21st Century Act became effective on October 28, 2004, and allows a paper check to be converted into an electronic image, a process called "check truncation."  This conversion may occur at any time during the life cycle of a check. Electronic check exchange reduces costs associated with the sorting, transporting, and reconciling of paper checks.

Through the process of check truncation, a paper check can be replaced by an electronic image containing essential information from the original check.  This means that when you make a purchase by writing a check and the store deposits your check with its bank, the bank may truncate the original check and process the check information electronically. From there, the information can be sent to the Federal Reserve electronically for processing.  The store’s account will be credited while your account will be debited.  If at any time during the check clearing process an institution requires a paper check, a substitute check can be created from the electronic version.  A substitute check is a paper reproduction of the front and back of the original check and is suitable for automated processing.