MM Money

A New Era In Banking Begins

Every night, millions of cashed checks fly around the country, headed for their home bank. Starting Thursday, technology will begin grounding many of those flights. And it may ground some consumers, too — those who try to sneak an extra day or two of "float" out of their checking accounts.

A new era in banking has begun as the Check Clearing for the 21st Century Act, commonly known as Check 21, takes effect. Banks will slowly get away from the business of flying checks around the country each night. Instead, checks will be cleared electronically, and often destroyed when they are cashed.

"We are bringing the industry out of the Pony Express era," said John Hall, spokesman for the American Bankers Association.

But the new law might have some surprising — and unwelcome — side effects for checking account customers. Consumers trying to stretch their money have become accustomed to taking advantage of "the float" — the time it takes after they write a check for banks to deduct from their accounts. It's a bit of a secret loan, but Check 21 means it's about to be shut down for good.