It's more important than ever to be vigilant about your checking account record keeping. The good old days of writing a check and being able to count on several days of "float" before the money is deducted from your account are gone. The Clearing for the 21st Century Act, or Check 21, took effect in October 2004 and has changed the checking account landscape. It's designed to modernize the way checks are processed.

Say you write a check to Sky High Utilities to pay your bill. Sky High can turn the paper check into an electronic image and speed it through the system. Sky High no longer has to mail the check to its bank, which in turn may mail it to a regional bank, which then mails it to your bank for payment.

In addition to saving the banking industry billions of dollars in transportation and processing costs, it avoids situations where transportation grinds to a halt due to weather or more dreadful reasons such as Sept. 11.

Potential problem for consumers
While Check 21 doesn't yet mandate the electronic conversion of paper checks, the potential problem for you as a checking account customer is that you don't know which checks you write are converted until you see your monthly account statement. That means it's unwise to count on "float" -- the amount of time that lapses from when Sky High Utility sends your check to its bank to when your bank receives the check and debits your account.

If you keep enough money in your account to cover the checks you write, you probably don't care very much about float. But many people live a bit close to the edge with their checking accounts, and they could see checks bounce.

Substitute checks
Under the old system, most banks gave customers the option of receiving their canceled checks. Banks no longer have to do that, and customers can't demand that a canceled check be returned to them. If you have a dispute regarding a payment and you need a copy of the original check, you'll have to ask your bank for a substitute check. A substitute check is a new negotiable instrument created by the Check 21 law.

Substitute check

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A substitute check is a paper reproduction of your original check that contains images of the front and back of your original check. It must carry the legend: "This is a copy of your original check. You can use it the same way you would use the original check." If you receive a copy of your original check and it doesn't have that legend, it's not a substitute check and is not a negotiable instrument. The true substitute check can be used as proof of payment, even in court.