Introduction | Checking Accounts | MICR | Float | Check 21 | Debit/ATM | Technology
Introduction
In 2006, individuals and businesses across the country wrote approximately 42.5 billion checks.  Households wrote an average of 12 checks per month, usually to acquire cash, pay bills, make retail purchases, and complete person-to-person transactions.
Below is an example of the steps that may be involved in the check clearing process.
The Check Clearing Process
You go shopping and write a check from an account you have with your financial institution. (Find out more about checking accounts.)
The store deposits the check with its bank.  The store, bank, or Fed places a magnetic ink code for the dollar amount in the lower right-hand corner of the check.
The store's bank sends the check to a Federal Reserve Bank to be cleared. (The bank could send the check to a private bank, called a "correspondent bank." The Federal Reserve System clears about one-third of all checks written in the country.)
The Federal Reserve Bank runs the check through its sorting machines.  (Learn more about the MICR line.)
After the Federal Reserve Bank processes your check, a credit and the check are presented back to the depostiting financial institution. The institution then credits or debits the appropriate store or customer account.
There is a short period of time between when the store’s bank is credited for the check and when your bank is presented with the check.  During this time, both financial institutions have the same funds available to them, called “float.” (Learn more about float.)
You receive a summary of the transaction in your bank statement.