Check Clearing

Check clearing

The movement of a check from the depository institution at which it was deposited back to the institution on which it was written; the movement of funds in the opposite direction and the corresponding credit and debit to the involved accounts. The Federal Reserve operates a nationwide check-clearing system.

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Check Clearing

The process in which a bank collects the funds on a check deposit from the issuing institution. Check clearing involves the bank in which the check was deposited mailing the check to the issuing bank. The issuing bank then credits the deposit bank the funds on the check, assuming the check writer had the funds in his/her account. The deposit bank in turn credits the individual account into which the check was deposited. In the United States, the Federal Reserve operates a national check clearing system to expedite the process. See also: Check hold.