9-11 And Your Checking Account

 by: Tom Koziol

Imagine a catastrophic event triggering the government to change the rules covering your checking account. Actually, you don’t have to imagine it because it happened in New York on 9-11.

The ensuing halt to commerce in the immediate days after 9-11 (about four total) was enough of a catalyst for our otherwise sloth emulating elected Congressional representatives to pass an act that would ensure the transfer of checks between financial agencies would not again be disrupted by catastrophe, act of God, or dumb luck.

The act is called The Check 21 Act and went into effect on October 28, 2004. It created a new negotiable instrument called the substitute check so that once a customer’s check is deposited, the funds will be available in a matter of hours. This is obviously a plus for the party to whom written.

Float time, the once magical free ride, has virtually disappeared. Not in every instance but you can bet your bottom line, in most. This is a minus unless your bank isn’t using the substitute check negotiable instrument.

Asking your banker is your only way to know for sure. Of course, if you have been reading your statements, the answer may be right in front of you. But, it may not. So, repeating myself, ask your banker.

If your bank is using the substitute check, it is electronically transferring funds instantly between the account on which the check is drawn and the account into which it is deposited. Some would say that is nothing more than a simple bank transaction.

I would agree but the kicker is the original paper check never changes hands. If you see an inherent problem, welcome to the club. However, this article isn’t about problems, inherent or otherwise, with electronic facsimile substitute checks, it is about you knowing about the new procedure put in place by the government to insure commerce continues even under the most dire of events.

You can learn more about the Check 21 Act by visiting the Federal Reserve at:

www.federalreserve.gov/paymentsystems/truncation/default.htm

I don’t know about you, but I believe being forewarned means being forearmed.