How checks clear
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Say you sold something on Craigslist or at a yard sale, and the buyer paid you by check. How long will it take for that check to clear so you know the money is good? When can you be sure you aren’t a victim of fraud?
The amount of time it can take to realize a check is bad makes check scams a popular form of fraud. Understanding how checks work can help you plan for the possibility of a fake check.
How a check works
Once you deposit a check, the cash value generally appears in your account. However, a portion or all of the amount may be subject to a hold. This hold usually lasts 2 to 6 days. But even if a hold is released, it’s no guarantee the funds have cleared. While the hold period acts as a safeguard that the check will go through, it may still be on its journey.
After deposit, the check goes to the Federal Reserve, which routes it to the check writer’s financial institution to confirm the money is available. The other institution pulls the money out of the appropriate account, and the check is not returned.
However, if the check is fraudulent, the financial institution returns the check to the Federal Reserve. The Federal Reserve then sends the “bounced” check back to your financial institution.
This is when you get the bad news — those funds you thought were in your account are no longer there. Worse yet, you may be liable for a returned-check fee. This process usually takes between 2 days and 2 weeks, but it could take even longer.
Things to know when receiving a check
- A check “clears” when the money has transferred from the check writer’s account
- You’ll have to repay any funds you use if the check bounces
- You could incur an insufficient funds fee
- Checks can be returned up to 45 days after being deposited
- When making a Mobile Deposit, keep a copy of the check for up to 60 days