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Basics of How Checks Clear

How Banks Clear Checks

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Man at home paying bills
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When banks clear checks, the money is taken from a checking account and sent to the check recipient's account. The receiving bank requests funds from the check writer's bank, and if all goes well the money is transferred.

Clear Checks You Write

It can take a while to clear checks. Once you write the check, you should act as if the money is no longer in your account. However, it may take days (or longer) for the money to actually leave your account. During that time, the check is said to be "outstanding". Using the money in the meantime is called "taking advantage of the float".

Note that banks and merchants increasingly use electronic tools to clear checks more quickly. This means they can clear checks more quickly and you'll need to be extra careful about keeping enough money in your checking account.

Clear Checks You Receive

When somebody writes you a check, it "clears" when the money hits your account and you can spend it. However, you can get into trouble - even if you think they cleared the check.

The bank is required to make at least part of your deposit available to you, and they might even assume that the check is good and you can use all of the money. Convenient, right?

If the check bounces, you’ve got trouble. The bank will take the money back, and if you’ve already spent the money you’re responsible for paying the bank back.

Dangers of "Cleared" Checks

If you have any doubt about a "cleared" check, don’t spend the money until you’re certain that your bank has collected the money it needs. You can call your bank and ask whether or not they’re 100% certain the check is good, and if there is any risk in using the money.

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