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Endorsements and Check Clearing

If someone makes out a check payable to you (a paycheck, for example), you must endorse (sign) it on the upper back before depositing it in your bank account. Assuming the check is from a different bank, your bank will send the check through the Federal Reserve Bank’s check clearing system. You will then have to wait for the check to “clear” (which means your bank has successfully collected the money from the bank the check is drawn against) before you can safely write a check against the money or withdraw it from the bank.

The waiting period for checks to clear does not depend on the actual clearance time, but on your bank’s individual procedures and policies. The bank wants to hold and use your money in its investments for as long as possible before making it available to you (or paying you interest on it). Local checks should only take a day or two to clear, out-of-town checks a week or so, but each bank has its own procedures. Banks with the best customer service policies often have the shortest clearing times.

Bear in mind, of course, that any given check may “bounce,” which means that it was not successfully paid off because of insufficient funds, a closed account, or other reason. In addition to not making the funds available to you, your bank will probably charge you a fee for the transaction, despite the fact that the “bad check” was not your fault.

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