9/14/2004

Electronically Cleared Checks

Last year, The Check Clearing for the 21st Century Act, known as Check 21, was passed by Congress. Digital images of checks will now be used for proof of payment. This will run checks through just like a debit card. A substitute check will be sent out instead of the actual check.

Society today has become used to the "floating" time between writing a check and when it is actually deposited. Checks have become more of a short time loan to some consumers. When there is no money in their account to cover the check, they merely use time for their advantage. Americans are far enough in debt with using credit cards and by adding Check 21 only more debt will follow.

Checks will bounce. Consumers will complain. Change will occur. Is Check 21 really going to help anything or is it just another technological change?

1 comment:

Dr. Tufte said...

Two instances of a questionable spelling in Bruce Banner's comment, and one misspelling in Rufio's comment.

Check 21 is an interesting application of public choice theory. It argues that politically popular actions will offer large benefits to a small group, and spread the costs thinly across the much larger remainder of the population. I see Check 21 as something that will go through because the banks (the small group) get a big benefit out of it, while most people won't pay a huge cost if they can no longer kite checks. But, I could be wrong - banks don't vote.