[stevenjgarner]

> “Clearing” is a magic finance word. Clearing a check refers to completing the process which the check agrees to: the writer sees money leave their account and the person depositing the check sees it enter theirs. This is much more complicated than it sounds in this quick gloss.

Just because the writer of the check sees the funds of their check leave their account, this does not mean the recipient of the check has collected those funds. At any given moment, there is a considerable amount of money belonging either to check writers or recipients, not under their control yet being invested in overnight investments and repurchase agreements for the profit of the bank(s) involved. This becomes quite exaggerated when you think of the time zones involved and the fact that the resolution of the clearing houses is greater than or equal to 24 hours. So a check from an account in Puerto Rico to an account in Hawaii will take a minimum of 24 + 6 hours = 30 hours for the bank(s) to get a return on their customer funds. As the article points out, the "clearing" of funds to the recipient's account is an act of credit and not an act of money transfer.

[gosub100]

For many years it was one of the entry-level jobs for pilots. "check runners" were essentially overnight couriers that would fly everywhere, even to rural areas, collect bags of checks and take them to major branches where they were cleared.

I remember an article, probably from 20 years ago, warning people that the check infrastructure was about to change and people who were "floating" checks for 2-3 days (relying on this behavior) weren't going to be able to rely on it any more. I think that was when they went to electronic scanning at the bank itself.

[ska]

This is also why you can end up with an extended hold on a deposited check.

Consider for example personal check issued between banks in two countries. There may not be a formal complete resolution process, so funds are released to you only after your bank is reasonably certain that the other bank is going to honor it, or more likely, not going to ask for it back.