Perhaps you have heard of a relatively recent change in how checks are processed once you have written them and you have asked "What is Check 21?". The change known as check 21 took effect in fall of 2004 and the change in the law allowed the recipient of the paper check to make an electronic substitute for the actual check which can then be sent through the cashing process much faster than a physical document since it can be sent electronically. This is one reason why, when you write a check to pay bills, the money seems to be coming out of your account sooner than in the past. It is also why there are fewer, if any of your checks returned to you each month with your bank statement.
When you are finding out about check 21, you are going to see that the one change that seems to be the biggest difference to consumers is that the money paid is taken out of your checking account sooner than before and if you have written a check with the intent of getting a deposit in to cover it a day or two later, you may well bounce that check before your deposit can be made to cover it. personal check clearing is just happening much faster.
There are more fees charged for insufficient funds checks or NSF under this system and there is the potential for more overdrafts to occur since consumers still tend to hold the expectation that they had a cushion of time between tendering a check and having the funds deducted from their accounts.
What is check 21 doing to help businesses? They no longer have to wait a matter of days to get their received checks accepted and then cleared. That same speeding up of the process that can cause the consumer to face the bounced check is getting the funds to the retailer faster and for them it is a huge benefit. Banks are also benefiting because while the funds may be deducted faster from the checking account, they are held in a bit of limbo for a short time during which the banks can collect interest on the accumulated monies that are in the stages of being processed between accounts.