Continuation

Up until 2004, the check had to travel all the way back to your aunt’s bank by truck or by plane.
If there was enough money in her account to cover it, her bank would “clear” the check. If
there wasn’t enough, her bank would stamp it “NSF”—Not Sufficient Funds—and “bounce”
it back to your bank. And on top of all that, your aunt’s bank had to send her cancelled checks
back to her every month, along with her account statement.
All that paperwork might have been OK back in 1940, or even 1970, when Americans wrote
fewer checks. But as checks became more popular, banks spent more and more time and
money moving billions of pieces of paper around the country each year—not the best use of
resources, especially when new technology offered a more efficient way to do things.
In 2004, Check 21 went into effect. The new federal law made it possible for banks to handle
more checks electronically. Instead of physically moving checks from one bank to another,
banks can now electronically transmit images of the checks they process. It’s a lot faster and
less costly.
For more information on Check 21, see Frequently Asked Questions about Check 21,
http://www.federalreserve.gov/paymentsystems/truncation/faqs2.htm