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. However, it's important to understand exactly what that means and at one point the money definitely is yours. Processing checks can be a confusing process and susceptible to scams. The results can be a costly lesson in the risks of accepting a payment by check.

The process of clearing checks involves moving money from the check writer’s account to your account. Once this process is complete, it should be safe to spend the money. The most important thing to know, though, is that the process takes time and a check still can bounce after you deposit it—even if your bank allows you to withdraw cash from that deposit.

Did it really clear?

Unfortunately, the term “clear” sometimes gets used prematurely. An item has cleared only after your bank receives funds from the check writer’s bank. 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, but that doesn't necessarily mean you can spend the money risk-free.

In many cases, when a bank employee tells you an item cleared, she is saying you can spend that money with your debit card, withdraw the cash from an ATM, or set up a payment online. Most of the time, this informal terminology is fine because funds typically arrive without problem.

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, on certain official checks, $5,000—and they might need to release the remaining funds after several business days. That only means you have access to the money. It does not mean the funds have arrived from the check writer’s bank.

What if you spend the money?

If a check bounces, the bank will reverse the deposit to your account—even if you've spent some or all of the money from that deposit. If you don't have enough money in your account to cover the reversal, you’ll have a negative account balance and you could 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.

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 more than enough time to wait. Most checks from banks inside of the United States will clear—or bounce—within a few business days.

However, other types of problems also can 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 clear, but you eventually could 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 else of value you might have provided in exchange for those funds. In many cases, it’s difficult or impossible to track down the person down. If it was an honest mistake, you might be able to resolve the situation simply by asking for another payment.

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 typically can accept checks with more confidence. If you don’t know who you’re dealing with, consider a wire transfer to your account instead, although you might have to reveal your account number. Be especially careful in the following situations:

  • You receive a check from somebody you don’t know.
  • A check is written for more than the amount you asked for.
  • A sender wants you to return excess money or send it to another business associate.
  • A check is from a foreign bank or otherwise suspicious entity.
  • A check came from somebody who is not local.

When in doubt, call the bank that the check is drawn on to see if you can get any information about the check and if it has cleared. Don’t call the number on a 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.