Check 21

If you've been filing away your cancelled checks in a shoebox somewhere you will soon have more storage space. Starting October 28th, banks that still return cancelled checks may be sending you something that looks a little different. It is part of Congressional efforts to improve security and move the banking system electronically into the 21st century.

Every time you write a check, it begins a journey that ships it through one of three hundred check processing centers across the country. It's handled by dozens of people, travels by truck and may even take a plane ride until it arrives back at your bank and in many cases home to you in your monthly statement. Matthew Veneri, Banking Industry Analyst: "Looking back at the events of 9/11 when the transportation system ground to a halt, a lot of things people don't realize is that checks are transferred via airplanes via trucking across the country back to central clearing houses. It's going to eliminate that step in the process."

A new federal law permits banks to create an electronic image of your check. Banks have been using imaging for years, but the law allows the depositor's bank to create the electronic version. Nessa Feddis, American Bankers Association: "Will people have a paper trail? Absolutely, just as today they use images as proof of payment, the IRS, the courts and everyone else has used them as proof of payment for decades, they will be able to use the images as proof of payment."

Electronic processing will allow banks to process checks faster. That means faster detection of illegally written checks which could put a dent in the 700 million dollars lost to check fraud each year. It also means a check you write will enter the system faster, so if you rely on the float by writing checks on money that is not yet there, they may bounce.

Susan Grant, National Consumers League: "One of the most important things that people should know about the new law is that your checks will be processed a lot faster. You can't count on the float anymore That means when you write a check, you need to make sure you have the money in your account to cover it."

The banking industry refers to electronic imaging as Check 21... that's short for the Check Clearing for the 21st Century Act. You should check with your bank to see how all this will affect you.