how did banks clear checks and get funds from other banks before computerization?
In: 6540
The physical check was taken to the bank. They then contacted the appropriate bank (if it was from a different bank) with the account on the check to notify them of the transaction. Both banks updated their ledgers for that account.
Auditing was extremely important (and still is) to make sure that all the numbers added up and no shenanigans were happening.
This is why checks were able to “bounce”. The person wrote a check for an amount of money they didn’t have in the account. So when the check is deposited the bank finds out there isn’t enough money in the account to cover it. The bank then notifies the depositor that the check wasn’t good and they didn’t get the money. The process took time to complete.
Businesses would have to individually track if people wrote them bad checks.
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