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?


Bruce Banner said...

Check 21 will be a good thing for a business. Business loose a lot of money because of bounced or bad checks. I am not saying checks are a bad thing but they should be used as like a debt card. When a consumer writes out a check at a business it is processed right then and there (like a debt card) instead of a grace period.

This grace period gives a person to close an account before it is processed and leave with the merchandise and the store has lost money.

Rufio said...

I think that Check 21 sounds like a great way for businesses to protect themselves. It is true that society today has become use to this "floating" time that you mentioned. I don't feel that this is how checks were really supposed to be used though.

As with all new policies they take time to get familiar with. Of Coarse we may see more bounced checks when this policy is implemented, but problems will slowly diminish. In economics we learn we need to weigh the benefits aganist the cost. I feel that Congress has done that and made a good decision.

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.

Taber Wolrab said...

Check 21 will certainly have an impact on both businesses and consumers. I don't think it is just a technological change. This will help businesses get there money quicker, and it will be more guarenteed than a regular check.

Kiting is illegal. Check 21 will help prevent such illegal activities. We may see a change in consumer buying habits. Consumers will have to be more careful about the money they have to spend.

miles said...

I think that Check 21 is great for not only business but also the customer. Americans have relied on credit cards and "floating" of checks for too long. Sure, checks will bounce in the beginning while the customer gets used to this technological change, but it will also help Americans remember the concept of the dollar. Credits card and floating checks can create the idea that money does grow on trees, it is not until later that we realize that it can also bite back. I think that Check 21 will help American remember that money is real and in order to spend money, you must have money.