Eli5, how do checks work. Especially now that we can deposit them via phone now. What stops us from creating (e.g., photoshooting) fake checks all day.
In: Economics
A check is a promise to pay. Name, amount, bank information, and a signature to say it is you making the promise.
The banks use federal clearing houses to get the banks sorted and forwarded to the correct bank, that is the routing number. It tells the fed what bank to send the check to.
Once the bank has the check from the clearing house, the account number is used to match it to an account in their system. They can verify the check is *reasonably* valid by matching the name and signature to what they have on file. If they think it is good, they release the funds to the clearing house. if they don’t like it, they send the check back to the clearing house as a reject.
that 5-10 days it can take for a check to be sent through the system is called the float. When you write a check to purchase something it might not actually hit your account for several days due to this processing delay.
The new digital submission is based on your contracted agreement with your bank. They submit a digital copy of the check to the clearing house and it is treated the same as a physical check.
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