What is Check?

A check is a written, dated, and signed negotiable instrument that orders a bank to pay a specific amount of money from the drawer's checking account to the payee named on the instrument. Checks are governed primarily by Article 3 and Article 4 of the Uniform Commercial Code (UCC), adopted in all 50 states, and by federal regulations including the Expedited Funds Availability Act (Regulation CC) and the Check Clearing for the 21st Century Act (Check 21).

Under Regulation CC, banks must make funds from deposited checks available within specified timeframes. For most checks, the first $225 must be available by the next business day, with the remainder available by the second business day after deposit. Certain exceptions (new accounts, large deposits over $5,525, redeposited checks, and repeated overdrafts) permit longer hold periods. Check 21, enacted in 2003, created the substitute check (a paper reproduction of the original check that is the legal equivalent of the original for all purposes) enabling electronic check processing and dramatically reducing float times.

The Federal Reserve's check-services infrastructure processes checks through a nearly entirely electronic system. The Check 21 Act also created an expedited recredit procedure: if a consumer suffers a loss due to a substitute check, the bank must recredit the account within 10 business days (or 5 business days after receiving the claim, whichever is later) while the claim is investigated.

When transacting with paper checks, bank depositors must understand the legal and security requirements for check endorsements and stop-payment orders. To deposit or cash a check, the payee must endorse the reverse side; a blank endorsement (simply signing the payee's name) converts the check into a bearer instrument, enabling anyone who holds it to cash it. Restricting the endorsement (such as writing 'For Deposit Only' and the account number) secures the check, preventing unauthorized cashing. Furthermore, if a check is lost, stolen, or issued in error, the drawer can contact their bank to place a stop-payment order. Under the UCC, an oral stop-payment order remains legally binding for fourteen calendar days, whereas a written stop-payment order is valid for six months, typically requiring a fee of $20 to $35 to execute.