We are independent & ad-supported. We may earn a commission for purchases made through our links.
Advertiser Disclosure
Our website is an independent, advertising-supported platform. We provide our content free of charge to our readers, and to keep it that way, we rely on revenue generated through advertisements and affiliate partnerships. This means that when you click on certain links on our site and make a purchase, we may earn a commission. Learn more.
How We Make Money
We sustain our operations through affiliate commissions and advertising. If you click on an affiliate link and make a purchase, we may receive a commission from the merchant at no additional cost to you. We also display advertisements on our website, which help generate revenue to support our work and keep our content free for readers. Our editorial team operates independently of our advertising and affiliate partnerships to ensure that our content remains unbiased and focused on providing you with the best information and recommendations based on thorough research and honest evaluations. To remain transparent, we’ve provided a list of our current affiliate partners here.

What is Check Clearing?

Gerelyn Terzo
Updated Feb 25, 2024
Our promise to you
WiseGeek is dedicated to creating trustworthy, high-quality content that always prioritizes transparency, integrity, and inclusivity above all else. Our ensure that our content creation and review process includes rigorous fact-checking, evidence-based, and continual updates to ensure accuracy and reliability.

Our Promise to you

Founded in 2002, our company has been a trusted resource for readers seeking informative and engaging content. Our dedication to quality remains unwavering—and will never change. We follow a strict editorial policy, ensuring that our content is authored by highly qualified professionals and edited by subject matter experts. This guarantees that everything we publish is objective, accurate, and trustworthy.

Over the years, we've refined our approach to cover a wide range of topics, providing readers with reliable and practical advice to enhance their knowledge and skills. That's why millions of readers turn to us each year. Join us in celebrating the joy of learning, guided by standards you can trust.

Editorial Standards

At WiseGeek, we are committed to creating content that you can trust. Our editorial process is designed to ensure that every piece of content we publish is accurate, reliable, and informative.

Our team of experienced writers and editors follows a strict set of guidelines to ensure the highest quality content. We conduct thorough research, fact-check all information, and rely on credible sources to back up our claims. Our content is reviewed by subject-matter experts to ensure accuracy and clarity.

We believe in transparency and maintain editorial independence from our advertisers. Our team does not receive direct compensation from advertisers, allowing us to create unbiased content that prioritizes your interests.

Check clearing represents the time in which a payment by check, either paper or electronic, is processed by a bank. Depending on the size of a financial institution, the process by which checks are cleared can vary. Ultimately, a payment is made from a customer's bank account to the payee at the time that a check is cleared.

Before a check can be cleared with any financial institution, however, a customer must have a checking account. Funds are drawn from that account. If the amount of money requested exceeds the size of the account, a check can be returned for insufficient funds and the customer can be charged overdraft fees. Some banks offer overdraft protection, which allows checks to clear even if the funds are not available. Overdraft protection typically comes with limits and fees associated with the service.

Banks depend on the revenue generated from overdraft fees for a significant portion of earnings. These fees represent the largest portion of service charges on deposit accounts for large banks annually. A bank relies even more heavily on fee income when revenues from other financial products, such as mortgages, are under pressure. Customers have the biggest problems with check clearing during the months of November, December and January. A high percentage of these fees are assessed during this time period because consumers tend to spend more money during the holiday season.

In some regions, a bank must indicate the approach it takes for check clearing. For instance, one method is to process checks as they come in, regardless of the value of the check. Another method that is widespread among large banks is to process checks in a high-to-low manner. In this process, the check with the highest value is processed before any of the smaller checks.

If several checks are received by a bank on the same day, and the total sum of the combined checks exceeds the amount available in the customer's bank account, this can wreak havoc on the account. A bank that uses high-to-low check clearing will process the largest check first, followed by the smaller checks in descending order. This increases the likelihood that a checking account will become overdrawn after the first big check is processed, which will result in more overdraft fees for a customer as each of the smaller checks is processed.

Customers can access another form of check clearing with a debit card. A debit card works similar to a check, except transactions typically are processed at the time of the transaction, which could cut down on overdraft fees. In a checking account transaction, funds are drawn when the check is received by a bank, which could be days after a purchase is made.

WiseGeek is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.
Gerelyn Terzo
By Gerelyn Terzo
Gerelyn Terzo, a journalist with over 20 years of experience, brings her expertise to her writing. With a background in Mass Communication/Media Studies, she crafts compelling content for multiple publications, showcasing her deep understanding of various industries and her ability to effectively communicate complex topics to target audiences.
Discussion Comments
Gerelyn Terzo
Gerelyn Terzo
Gerelyn Terzo, a journalist with over 20 years of experience, brings her expertise to her writing. With a background in...
Learn more
WiseGeek, in your inbox

Our latest articles, guides, and more, delivered daily.

WiseGeek, in your inbox

Our latest articles, guides, and more, delivered daily.