Has my Check Cleared?

Millions of checks are cashed or deposited in financial institutions across America every day. Every institution must provide its customers with its “Funds Availability Policy” that describes its practices for making funds available for withdrawal after deposit. However, when your financial institution tells you that your funds are “available for withdrawal,” it is NOT telling you that your check has “cleared” or that your check will be paid by the bank on which it is drawn.

What’s the difference?

“Available for withdrawal” is a legal term defined by federal law and regulations designed to provide customers with quick access to their funds. It is based on the fact that a vast majority of checks are processed quickly through the payments systems and are drawn on legitimate accounts that have sufficient balances to pay the check.

Unfortunately, some checks are fraudulent, are drawn on accounts with insufficient funds or drawn on accounts that have been closed. This is a real concern for customers and financial institutions.

A common scam that utilizes fraudulent checks is known as the “cashier’s check scam.” Here is how this scam works:

• A consumer advertising an item for sale receives what appears to be a legitimate cashier’s check for more than the sale price from a buyer
• The consumer is asked to deposit the check into his or her account
• The consumer is then asked to wire some of the “excess” to a third party the seller does not know

It may take weeks or even months for the counterfeit cashier’s check to come back to the customer’s bank unpaid, especially if the check is drawn on a bank outside the United States. These scams are also run with counterfeit money orders and treasury checks.

There is no simple way for your bank to declare with certainty that a check you have deposited into your account is “good” or will clear, unless the check is drawn on another account at your bank. Some checks can take days or even weeks to be paid, depending on the bank's location and several other factors. Due to privacy and security concerns, many banks will not confirm—even for another bank—whether a check has been paid.

Tips for consumers to avoid check scams:

• Never accept a check or money order that requires you to deposit and then wire a portion of the amount to a third party you do not know. This is almost always a SCAM.
• While most checks are “available for withdrawal” quickly, as a depositor, you are responsible for checks and money orders you deposit. If a check you have deposited is returned to your bank unpaid (it “bounces”), and you have already withdrawn the funds, your bank has the right to obtain reimbursement from you. You are responsible for any loss.
• Only accept checks from people or entities that you know.

If you suspect that you have been the victim of a check scam, contact your financial institution immediately.