Overview Clearing Checks
The process of clearing checks involves moving money from the check writer’s account to your account. To do this, you deposit the check, your bank asks the check writer’s bank for money, that bank takes money from the check writer’s account, and they send it over.
Once this process is complete, you know you can spend the money.
Clearing Check Confusion
The process and terminology of clearing checks is confusing, and you may think that the process above has taken place. A bank employee might even tell you that the check "cleared" - but that doesn’t mean you’re off the hook.
Banks are required to make a portion of your deposit available to you even before they collect money from the check writer’s bank. They might even make the entire deposit available if the check you deposit appears to be a cashier’s check or government check, or after a certain time limit.
However, you’re still at risk until the money arrives from the check writer’s bank. If you spend the money you deposited (believing that the check was good) you’ll have to pay it back if the check ends up bouncing.
It can take several weeks or more to find out if a check bounced, and you may have spent the money long ago.
There are a few things that indicate a higher likelihood of trouble clearing checks. If the check comes from your business partner who regularly sends checks, you don’t have to worry as much. However, be extra careful in the following situations:
- You receive the check from somebody you don’t know
- The check is written for more than the amount you asked for
- The sender wants you to wire excess money back (or to a business associate)
- The check is from a foreign bank or suspicious sounding entity
- The check came from somebody who is not local