Did That Check Really Clear?

Protect Yourself From Scams

Young woman depositing check online with camera phone
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When you deposit a check and it “clears,” that’s a good thing – but what does that really mean? Can a check bounce or be canceled after it clears? Processing checks is a confusing process, and scammers take advantage of that confusion. The results can be a costly lesson in the risks of accepting a payment by check.

The most important thing to know is that a check can bounce after you deposit it – even if your bank allows you to withdraw cash from that deposit.

Overview of Clearing Checks

The process of clearing checks involves moving money from the check writer’s account to your account.

  1. You deposit the check at your bank or credit union.
  2. Your bank requests money from the check writer’s bank.
  3. That bank removes funds from the check writer’s account.
  4. The money moves over to your bank.

Once this process is complete, it is generally (but not always) safe to spend the money. 

Did It Really Clear?

Unfortunately, the term “clear” sometimes gets used prematurely. An item has really only cleared after your bank received funds from the check writer’s bank. But bank employees might tell you that a check has cleared, and your bank’s computer systems might show that you have those funds available for withdrawal. That doesn't necessarily mean you can spend the money risk-free.

Mixed terminology: In many cases, when somebody tells you an item cleared, they’re saying that you can use the money (in other words, you're allowed to do so at your own risk). You can spend that money with your debit card, you can withdraw cash at an ATM, or you can set up a payment through online bill pay. Most of the time, this informal terminology is fine – the check doesn’t bounce, you can spend freely, and the funds arrive without problem.

Funds available: Most of the confusion around checks comes from bank policies and federal laws that allow you to spend money before a check really clears. Banks are required to make a portion of your deposit available quickly (usually the first $200, or $5,000 on certain official checks), and they might need to release the remaining funds after several business days. But that just means you have access to the money – it doesn’t mean the check has cleared (or that the funds have arrived from the check writer’s bank).

A common example of how this confusion can cause problems is the classic cashier’s check scam. In that scam, somebody sends you a check for more than is required, and they ask you to return the excess (before you find out that the check bounces).

What If You Spend the Money?

If you deposit a check, withdraw funds, or spend the money — and the check bounces — you’ve got problems. The bank will reverse the deposit to your account. If you have money in the account, your account balance will drop. If not, you’ll have a negative account balance and you’ll start bouncing other payments and racking up fees.

Ultimately, you are responsible for deposits you make to your account, and you’re the one at risk. You are protected from certain types of errors and fraud, but that protection does not cover bad checks that you deposit. To get your money back, you'd have to go after whoever gave you the bad check.

How to Protect Yourself

There are a few ways to avoid getting ripped-off (or having to pay for somebody else’s honest mistake). First, the longer you wait to spend the money, the better your chances. In many cases, a few weeks to a month is plenty of time to wait – most checks from banks inside of the United States should bounce by then if they’re going to bounce.

But other types of problems can also arise. For example, a thief could pay you with a stolen check from a legitimate account that has plenty of money available. In that case, the check won’t bounce due to insufficient funds – but the account owner will not appreciate having their money stolen. The check might actually clear, but you could eventually lose that money once it’s discovered that the payment was fraudulent.

When somebody pays you with a bad check, you generally need to bring legal action against them to recover your funds (or whatever value you might have provided to the person who paid you). In many cases, it’s difficult or impossible to track that person down. If it was an honest mistake, you might be able to resolve the situation simply by asking for another payment.

Because of the risks and difficulty of recovering money, preventing problems is essential, and a few red flags can help you avoid trouble.

Red Flags

Always use caution when accepting checks. If you know who you’re dealing with and they regularly make payments without a problem, you might be able to let your guard down (unless they’re training you to do that, as with money transfer job scams). If you don’t know who you’re dealing with, do whatever you can to get paid safely:

Be especially careful in the following situations:

  • You receive the check from somebody you don’t know.
  • The check is written for more than the amount you asked for.
  • The sender wants you to wire excess money back (or to a business associate).
  • The check is from a foreign bank or suspicious-sounding entity.
  • The check came from somebody who is not local (especially from a bank in another country).

Of course, at some point, you just have to decide whether or not you trust somebody or you feel uncomfortable. The items above are just some of the most common elements of check scams.

When in doubt, call the bank that the check is drawn on to see if you can get any information about how likely the check is to clear. Don’t call the number on the check since it may go to a scammer. Look up the bank’s number on the bank's official website and call that number instead.