Checking Accounts: Understanding Your Rights (2024)

You already know in many ways how your checking account works. You write paper checks, withdraw money from an automated teller machine (ATM), or pay with a check card. Your paycheck might go by "direct deposit" into your account, or you might deposit checks at a bank's teller window or ATM.

But recently, you might have noticed changes in your checking account. The checks you write might be "clearing"—the money is being taken out of your account—more quickly. Some checks you write might be listed as "ACH" transactions on your bank statement. Instead of receiving cancelled checks back from your bank, you might be receiving "substitute checks."

In This Section

  • What's happening?
  • Does it matter if my check is processed more quickly?
  • What are the different ways my check can be processed now?
  • Can I tell how my check is being processed?
  • May I choose the processing method for my check?
  • Can I get my cancelled checks with my bank statement?
  • What if something goes wrong?
  • What if I made the payment another way?
  • What if I can't resolve a problem with my bank?
  • NR 2005-75 –"Writing a Check: Understanding Your Rights"

What's happening?

Checks are being handled in some new ways these days and those changes can affect how you handle your money.

  • Some checks are now processed electronically and the original paper checks are destroyed.
  • Checks can be processed more quickly and your checks might be clearing faster.

You might not be able to get your original checks--or even copies of your checks--back from your bank.

Electronic processing may be even more common in the future, but one thing will not change: You will continue to have the right to dispute any mistakes and clear up problems with your account, whether or not you have the original check.

Does it matter if my check is processed more quickly?

Traditionally, when you wrote a check, the paper check was transported from bank to bank before the money was taken out of your account. Now that many checks are being processed electronically, money may be taken out of your account more quickly. To avoid bounced checks and related fees, you must be sure you have enough money available in your account to cover each check when you write it (and when you withdraw funds at an ATM).

Although electronic processing might mean that the check you write will clear more quickly, the funds that you deposit might not be available to you any more quickly. A federal rule governs the maximum time your bank can wait before making deposited funds available to you, and that rule hasn't changed. That's why you need to know exactly how much money is available in your account at the moment you write a check. For example, money from a check you deposit on a Monday might not be available until the following week. So, if you count on that deposit when you write a check on Tuesday to pay a bill, that check might bounce.

Also, be sure that the available account balance you're counting on does not include funds from your bank's "overdraft protection" program. It's possible that an account balance statement could include an overdraft protection amount, which could lead you to believe you have more money in your account than you really do.

What are the different ways my check can be processed now?

Remember, the way your check is processed will affect how quickly your check will clear and you have only limited ability to control the way your check is processed. A check you write can be processed in several ways:

  • Under the conventional method for processing paper checks, the check you write to a merchant (for example) is deposited by the merchant at the merchant's bank and the original paper check is then shipped from bank to bank. This process could take a few days.
  • A new federal law known as the "Check 21 Act" makes it easier for banks to create and send electronic images of paper checks. Even before Check 21, banks were allowed to process checks electronically when all the banks in the process agreed. Under Check 21, any bank may create a special paper copy—called a "substitute check"—using images of the front and back of an original check. If any bank in the process requires a paper check, another bank can send a substitute check in place of the original.
  • Under an Electronic Fund Transfer (EFT) process, a merchant or other party (such as a utility company) can change your paper check into an electronic "debit" that is paid from your checking account. The debit may be paid from your account much more quickly than if a check had been processed in the conventional way.
    • One kind of EFT uses the Automated Clearing House (ACH) network, which a merchant or company can use to convert a paper check into an electronic payment. For example, if you mail a check to your credit card company, the company may convert that check to an ACH payment. The company generally would destroy the original paper version and keep only an electronic image of the check.
    • Sometimes, a paper check can be turned into an ACH transaction right in front of you. For example, when you write a check at a retail store, the clerk might scan the information from the check, stamp your check "void" and hand it back to you, and then send the payment information to the merchant's bank electronically.

Can I tell how my check is being processed?

You probably will be able to tell how your check was processed, after the fact, by looking at your bank statement. Your bank is required to list every EFT transaction in your monthly bank statement, including the dollar amount, the date the transaction cleared, and the name of the recipient. Electronic transactions may be grouped together, apart from your regular check transactions.

If you receive a paper substitute check, you will be able to identify it by this statement: "This is a legal copy of your check. You can use it the same way you would use the original check."

If a merchant wants to turn your paper check into an EFT, the merchant should give you notice that your payment will be processed that way. There might be a sign at the cash register, or the cashier could inform you.

May I choose the processing method for my check?

Not usually. Check processing involves several parties-you, the person you're paying, that person's bank, and your bank. Each party has an interest in efficient, reliable check processing. Somewhere along the line, one of the parties might choose to process your payment electronically.

However, you can contact a party to whom you regularly mail checks, for example, the phone or credit card company, and tell them not to turn your paper checks into electronic ACH transactions.

Can I get my cancelled checks with my bank statement?

No law requires your bank to send you your cancelled checks. If you receive your checks or copies of checks, that's usually because of your customer agreement with your bank and your bank's policies. Many consumers don't receive their checks or even copies of their checks.

If you've usually received cancelled checks with your bank statement, you could start receiving substitute checks—the special paper copies created under the Check 21 Act—instead of, or in addition to, cancelled checks.

Even if you do not usually receive cancelled checks, you may ask your bank to provide you with copies of specific original checks, or the cancelled checks themselves. In most cases, your bank will be able to give you a copy of the check. But your bank might not always be able to. When a paper check is processed electronically, the original check is typically destroyed.

What if something goes wrong?

Let's say the wrong amount was deducted from your checking account. Or maybe you've discovered a payment that you never authorized. No matter how your check was processed, you should contact your bank right away. The bank might be able to clear up the problem quickly.

Even without a cancelled check, you can prove you made a payment with your bank statement, which shows the date and amount of the payment. You also might have a receipt from a retail transaction. In any case, the law does not require you to have the original paper check, or even a copy of it, to resolve a problem with a bank.

Generally speaking, you will not be held responsible for processing errors or transactions you did not authorize. Different laws and rules apply, depending on how your check was processed.

  • Under conventional check processing procedures, you won't generally be held responsible for payments you didn't authorize. The applicable law is a state law called the Uniform Commercial Code (UCC). Your precise rights, the length of time you have to file a claim, and the way you can file a claim, may differ depending on how the UCC was adopted in the relevant state.
  • The UCC also applies if a substitute check is involved, but so does the Check 21 Act. Check 21 provides for a special refund called an "expedited recredit" that applies only if you received a substitute check. To obtain this refund, you generally should contact your bank within 40 days of the date your bank provided you with the substitute check, or the date of the bank statement showing the problem. You must submit your claim in writing, along with information necessary for the bank to investigate. If the bank determines that your claim is valid, the bank must credit your account by the end of the next business day. If 10 business days have passed since you filed the claim and the bank has not determined whether the claim is valid, the bank must credit your account for at least part of the amount in question while it continues to investigate.
  • Electronic payments, including those involving ACH (such as a converted check), are governed by the federal Electronic Fund Transfer Act and Regulation E. You generally have 60 days from when you received the bank statement showing the error to notify your bank about the problem. Within 10 days after you notify the bank, the bank is required to investigate its records for an error; if the matter is still unresolved after 10 days, the bank must temporarily credit your account for at least a portion of the disputed amount and continue investigating for 45 days.

What if I made the payment another way?

Rules that govern EFT payments will apply if you make an ATM withdrawal, or if you use a debit card (check card), debit card number, or your checking account number without writing a paper check.

You could also make a payment through a "demand draft" or "remotely created check" (RCC) by authorizing someone to withdraw money from your account without your signature. For example, you could authorize your credit card company over the phone to make an RCC for payment on your credit card account before the monthly deadline. The Uniform Commercial Code applies to RCCs. While RCCs can be useful, you must trust the person or company you allow to create an RCC because the RCC does not include your signature, and proving that you did not authorize the payment could be hard.

What if I can't resolve a problem with my bank?

Contact your bank first. You might also contact the recipient of the payment. If you are unable to resolve the problem through the bank, and a national bank is involved-a national bank has the words "National," "National Association," or "N.A." in its official name-you may contact the Customer Assistance Group at the Office of the Comptroller of the Currency toll free at 1 (800) 613-6743.

For complaints about state-chartered financial institutions, contact the relevant state attorney general or state banking department. Links to state attorneys general can be found on the Website of the National Association of Attorneys Generals. The Conference of State Bank Supervisors lists state banking department links. You may also contact the Federal Reserve Board, or the Federal Deposit Insurance Corporation regarding state banks that are not members of the Federal Reserve System.

If you have a problem with the recipient of your check—an entity other than a financial institution, such as a department store—contact the Federal Trade Commission toll free at 1-877-FTC-HELP (1 (877) 382-4357). More information about contacting the FTC is on the Web.

Checking Accounts: Understanding Your Rights (2024)


What are the four basic rights you should understand as an account holder? ›

Although subjective, four basic consumer rights that are widely accepted are 1) the right to be informed, 2) the right to safety, 3) the right to choose, and 4), the right to voice your opinion.

Can anyone access my bank account without my permission? ›

There are several ways that scammers can gain access to your online bank account. They could use phishing attacks, malware or other cyberattacks, or buy your credentials online after a data breach.

Is your money protected in a checking account? ›

The FDIC insures your bank account to protect your money in the unlikely event of a bank failure. Bank accounts are insured by the Federal Deposit Insurance Corporation (FDIC), which is part of the federal government. The insurance covers accounts containing $250,000 or less under the same owner or owners.

What are the rights of bank account holders? ›

Legal Recourse for Unauthorized Transactions or Fraud:

Bank account holders have legal rights and recourse in cases of unauthorized transactions or fraud. These rights are established within the legal framework governing banking and consumer protection.

Can a bank deny you access to your money? ›

A bank account freeze means you can't take or transfer money out of the account. Bank accounts are typically frozen for suspected illegal activity, a creditor seeking payment, or by government request. A frozen account may also be a sign that you've been a victim of identity theft.

Can my bank refuse to give me my money? ›

Yes. Your bank may hold the funds according to its funds availability policy.

Who can access your bank account legally? ›

Only the account holder has the right to access their bank account. If you have a joint bank account, you both own the account and have access to the funds. But in the case of a personal bank account, your spouse has no legal right to access it.

Can a bank take money out of your account without consent? ›

In most cases, money can only be taken from your bank account if you've authorised the transaction. But if you notice a payment from your account that you didn't authorise, contact your bank or provider immediately.

Can Bank tellers see your balance without permission? ›

Can bank tellers access your account without permission? Bank tellers can technically access your account without your permission. However, banks have safety measures in place to protect your personal data and money because account access is completely recorded and monitored.

Why you shouldn't keep a lot of money in checking account? ›

Risks of Keeping Too Much Money in Your Checking Account

One reason is that it isn't going to earn you much interest. The national average for interest-bearing checking accounts is 0.07% APY. Compare that to a high-yield savings account that can earn as high as 5.00% APY or more.

Where is the safest place to put money if banks collapse? ›

1. Federal Bonds. The U.S. Treasury and Federal Reserve (Fed) would be more than happy to take your funds and issue you securities in return. A U.S. government bond still qualifies in most textbooks as a risk-free security.

What is the safest bank in the US? ›

Summary: Safest Banks In The U.S. Of June 2024
BankForbes Advisor RatingLearn More
Chase Bank5.0Learn More Read Our Full Review
Bank of America4.2
Wells Fargo Bank4.0Learn More Read Our Full Review
1 more row
May 20, 2024

Who owns the money in your bank account? ›

At the moment of deposit, the funds become the property of the depository bank. Thus, as a depositor, you are in essence a creditor of the bank.

What laws and regulations protect bank accounts? ›

The FDIC guarantees a standard insurance amount of $250,000 per depositor, per insured bank. Funding for the FDIC comes from premiums paid by member institutions. Federal agency regulations that concern banks and banking are codified in Title 12 of the Code of Federal Regulations.

Can money be taken from my bank account without permission? ›

Both state and federal laws prohibit unauthorized withdrawals from being taken from your bank account or charges made to your credit card without your express consent having first been obtained for that to occur.

What are the 4 basic consumer rights? ›

How a charter of basic rights began. In 1962, then US President John F Kennedy declared four basic consumer rights – the right to safety; the right to be informed; the right to choose and the right to be heard.

What are the four basic rights of customers? ›

President John F. Kennedy introduced the “Consumer Bill of Rights” in 1962. Every consumer has four fundamental rights: the right to safety, the right to choose, the right to be heard, and the right to be informed.

What are the four types of accounts you can have? ›

The four basic types are checking account, savings account, certificate of deposit and money market account. Each kind of account serves a different purpose.

What are the rights of customers of a bank? ›

EQUAL CREDIT OPPORTUNITY ACT OF 1974. Lenders of funds covered by the law cannot discriminate against a borrower on the basis of his or her age, sex, color, ethnic origin, marital status, religion, receipt of public assistance, or good faith exercise of the consumer's rights under the consumer credit protection laws.


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