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CHECK 21: Elimination of Float Could Create Financial Headaches
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Kelly Rote (713) 394-3201 |
Release Date: October 10, 2004 |
MMI offers advice to consumers to prepare for the loss of check float
On October 28, 2004, a new federal law will take effect -- the Check Clearing for the 21st Century Act, dubbed “Check 21” – that dramatically reduces the time it takes checks to clear the bank. Checks may clear virtually the same day they are written, rather than the traditional three days that many Americans have relied on for years.
Financial institutions will no longer have to transfer the original paper check through the check clearing process, but will rely on an electronic image of the check. While this system is more efficient for these institutions, its impact on consumers may be costly.
Many consumers have relied on the three-day float period for years as a cushion between paychecks. While many banks and credit unions are doing their part to educate their customers, many Americans will be unaware of this change, and can be left vulnerable to overdraft fees and potential credit damage.
Money Management International (MMI) offers these tips for preparing for Check 21:
· Similar to using a debit card, always ensure that you have sufficient money in the bank before writing any checks. While there may be some lag in clearing time, it can no longer be relied upon.
· Using a spending plan, prepare for monthly and periodic expenses. Ensure that you will not need to depend on the days of float for necessities.
· Do not expect to receive paper checks in the mail. Under Check 21 legislation, banks are only required to provide electronic, legal versions of checks back to consumers.
· Bounced checks may damage credit ratings, affecting future loan or mortgage applications and rates. Being prepared for Check 21 will save consumers money now and in the future.
“It is imperative that consumers become educated about this change and prepare themselves financially,” said Kelly Rote, communications manager for MMI. “If you choose to rely on credit cards due to reduced float, be sure to focus on needs rather than wants. Being prepared for the changes Check 21 will bring is just another part of good financial literacy.”
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Money Management International, is a non-profit community service organization that provides confidential financial guidance, counseling and debt management assistance to consumers. MMI helps consumers trim their expenses, develop a workable budget, lower their debt payments and repay debts. Services are available by phone. To visit with an MMI counselor, call toll-free 1-800-762-2271- 24 hours a day, 7 days a week. Spanish speaking counselors are available. Consumers can also learn more by visiting the MMI home page at www.moneymanagement.org.
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