We have talked about checks before. But I’ve heard about something called check clearing. What is check clearing?
Check clearing is the process through which money moves from one account to another when the payment has been made by writing a check – the amount is taken or debited from the check writer’s bank, and given or credited to the bank account of the depositor or person who receives the payment.
So how does the check clearing process work?
Let’s say you write a check to pay your cell phone bill. The phone company would deposit the check into their bank, which then requests the money from your bank. Your bank takes money out of your account, and transfers it to the phone company’s bank. This is when the check gets cleared.
How long does it take for a check to clear?
It used to take up to 5 business days, but can now happen a lot faster because of electronic check clearing. However, many banks make the funds available in the recipient’s account before the check actually clears.
What happens when there is not enough money in the check writer’s account for the check to be cleared?
In this situation, the check is not honored, or accepted by their bank, and is returned due to insufficient funds. The check would be honored by the bank if the account holder opts for overdraft protection – but that’s a topic for another time…
Podcast: What is Clearing of Check or Check Clearing
Fun, informative and concise episodes by a 10-year old, breaking down complex financial concepts in a way that kids and beginners can understand. Episodes cover personal finance topics like saving, investing, banking, credit cards, insurance, real estate, mortgage, retirement planning, 401k, stocks, bonds, income tax, and more, and are in the form of a conversation between a cowboy (a finance novice) and his friend, a stock broker. Making finance your friend, only at Easy Peasy Finance.
A little bit about me: I have been fascinated with the world of personal finance since I was 6! I love to read personal finance books, and keep myself updated on the latest by reading various personal finance magazines. My friends often ask me questions about finance because they find it complex and intimidating. That’s what inspired me to start my YouTube channel called Easy Peasy Finance when I was 8, and this podcast 2 years later.
All you need to know about check clearing: What is Clearing of Check / What is check clearing, How does the check clearing process work, How long does it take for a check to clear, What happens when there is not enough money in the check writer’s account for the check to be cleared, and more.
Show notes and transcript at: https://www.easypeasyfinance.com/what-is-clearing-of-check-or-check-clearing/