Check Services

Next to cash, checks are the most commonly used method of payment in the United States. The Federal Reserve Banks collectively are one of many providers of interbank check collection services to depository institutions. Currently, interbank checks, which are checks that are deposited at and drawn on different depository institutions, comprise about 80 percent of the checks processed. The remaining 20 percent of checks are "on-us" checks, which are checks that are deposited at and drawn on the same depository institution.

The clearing and settling of interbank checks requires a process for exchanging them (clearing) and providing for the related movement of funds (settlement) among the depository institutions involved. When a depository institution receives deposits of checks drawn on other institutions, it may send the checks for collection to those institutions directly, deliver them to the institutions through a local clearinghouse exchange, or use the check-collection services of a correspondent institution or a Federal Reserve Bank.

For checks collected through the Federal Reserve Banks, the account of the collecting institution is credited for the value of the deposited checks in accordance with the availability schedules established by the Reserve Banks. These schedules reflect the time normally needed for the Federal Reserve Banks to present checks to the institutions on which they are drawn. Most checks are collected and settled within one business day.

The number of checks written nationally has been declining since the mid-1990s. Accordingly, the Reserve Banks have been reducing the number of locations at which they process checks. Before the start of their check restructuring initiative in 2003, the Reserve Banks processed checks at forty-five locations. By the end of 2009, the Reserve Banks expect to be processing checks at one full-service check-processing location.

Further information on Federal Reserve check services