Check 21 is the name given to the law that allows banks to treat the image of a check as the real thing. Transmission of the images saves time and money, and it allows checks to clear even in the event of another 9/11 type of crisis that cripples the nation's transportation system (most checks travel in the bellies of airplanes).
Large banks started clearing checks electronically almost immediately after the law was passed. Now, as the NY Times reports, small businesses are able to take advantage of the efficiency improvement. The necessary hardware is available for about the price of a personal computer ($500-$1200).
Now banks are issuing miniature versions of those scanners to their small-business customers. The Stone Age, a 10-person company that sells stones, bricks, statues and tools to landscapers, started scanning its checks for deposit a few months ago. One of its owners, Jack Longo, estimates that it saves him five hours a week that used to be spent driving to and from the PNC branch about 10 miles away from his office in Totowa, N.J.
Mr. Longo had to go to the bank only twice in August: once because he had a check, for $50,000, that exceeded the dollar limit for remote deposit, and another time because he needed to initiate wire transfers that could be handled only at the branch.
Adding to the benefits, the device — a single-feed scanner made by the RDM Corporation — is connected to the company’s QuickBooks accounting software. After both sides of a check are scanned, the device’s software reads the routing number and dollar value and creates an electronic deposit slip. It also updates the company’s account balances and its accounts-receivable log.
“The computer automatically debits and credits the proper things, and all the bookkeeping is done at that time,” Mr. Longo said. That saves him money on the outside bookkeeper he pays by the hour. The scanner almost never reads the numbers wrong, he added, whereas “manually, you are prone to transposition or entering the wrong amount.”
Instructors who teach principles of macroeconomics are often discussing money and banking at about this time of the semester. This would be an interesting article for your classes and could be used as a starting point for a discussion of check clearing, the banking system, and the Fed.
Leave a comment