Did That Check Really Clear?
When is it safe to spend that money?
When you deposit a check and the funds show up in your account, that is generally a good thing. But it's critical to understand what that means—and does not mean—exactly. Just because your balance increases it doesn’t mean the money is definitely there—checks can be confusing and susceptible to scams. The results can be a costly lesson in the risks of accepting 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 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 only cleared 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, they are saying you can spend that money with your debit card, withdraw cash from an ATM, or set up a payment online. Most of the time, this informal terminology is fine because funds typically arrive as expected.
Most of the confusion around checks comes from bank policies and federal laws that allow you to spend money before a check 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. But that policy might prematurely provide access to the money. It does not mean the funds successfully arrived from the check writer’s bank.
What If You Spend the Money?
If a check bounces, the bank reverses the deposit to your account—even if you already 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 end up with 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 typically does not cover bad checks that you deposit. To get your money back, you may have to go after whoever gave you the bad check.
There are several 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 should clear—or bounce—within a few business days, but exceptions are possible.
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 initially, but you may eventually lose that money once the fraudulent payment comes to light.
When somebody pays you with a bad check, you might need to bring legal action against them to recover your funds or whatever else of value you provided in exchange for those funds.
In many cases, it’s difficult or impossible to track down people who intentionally pay with bad checks. But if it was an honest mistake, you might be able to resolve the situation simply by asking for another payment.
Always use caution when accepting checks. If you know who you’re dealing with and they regularly make payments without any problem, it’s reasonable to accept those checks with more confidence. If you don’t know who you’re dealing with, consider other forms of payment instead. You might be able to use an escrow service or another legitimate payment processor, but be mindful of scams on those networks, as well. Be especially careful in the following situations:
- You receive a check from somebody you don’t know.
- Somebody writes a check for more than the requested sum.
- 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 ask if it has cleared. Don’t call the number printed on a check since it may go to a scammer. Instead, look up the bank’s number on the bank's official website.
Federal Trade Commission. "Don't Bank on That Check." Accessed Feb. 24, 2020.
Office of the Comptroller of the Currency. “Checking Accounts: Understanding Your Rights.” Accessed Feb. 24, 2020.
Federal Trade Commission. “How to Spot, Avoid and Report Fake Check Scams.” Accessed Feb. 24, 2020.
Consumer Financial Protection Bureau. “How Quickly Can I Get Money After I Deposit a Check Into My Checking Account? What Is a Deposit Hold?” Accessed Feb. 24, 2020.
Federal Trade Commission. ”Don't Bank on That Check.” Accessed Feb. 24, 2020.
FDIC. “Consumer Protection – Deposit Accounts.” Accessed Feb. 24, 2020.
HelpWithMyBank.gov. “Are There Exceptions to the Funds Availability (Hold) Schedule?” Accessed Feb. 24, 2020.
FDIC. “FDIC Consumer News: Beware of Fake Checks.” Accessed Feb. 24, 2020.