UNIVERSITY PARK, Pa. -- Just when you thought you had mastered the details of handling your checking account, you may have to alter your check-writing habits. New federal legislation about to go into effect will change the ways that banks and credit unions handle personal checks, and a consumer-affairs specialist in Penn State's College of Agricultural Sciences says consumers should be aware of the key details.

"Check Clearing for the 21st Century Act," commonly called Check 21, becomes effective on Oct. 28. The new law will permit banks and credit unions to process more checks electronically and thereby reduce the costs of transporting paper checks. The change will result in quicker, more efficient processing, says Cathy Bowen, associate professor of agricultural and extension education.

"Previously, every check that you wrote went from the bank of the company or person you wrote the check to, to a central check clearinghouse -- typically a Federal Reserve Bank -- and then to your bank," Bowen says. "The central clearinghouse is avoided if the payee’s bank and your bank are the same. If your bank returns your cancelled checks, the processed paper checks are collected and returned each statement period.

"Under the new Check 21 guidelines, banks can take a picture of the front and back of your paper check and transmit payment information electronically. If you need a paper check, the bank can use the electronic picture and payment information to create a paper 'substitute check.' Thus, your original paper check no longer needs to be physically moved from the payee’s bank to a central clearinghouse, to your bank, then back to you."

The substitute check is a paper "picture" of the back and front of your original check with the statement, "This is a legal copy of your check," written on it. Substitute checks can be used as proof of payment.

The new system will introduce some substantial changes in banking habits, Bowen says.

"Checks will be processed faster, so you won't be able to count on the customary bank processing time, or 'float,' that you were used to," she says. "Therefore, write checks only if you have enough money in the account to cover them on the day you write the check. Also, you won't get back some or all of your original checks because they will not be returned to your bank. And you can ask for something called 'expedited recrediting' if you think a substitute check was improperly charged to your account.

"Under Check 21, banks generally have 10 business days after you complain to recredit your account for amounts up to $2,500 per check, pending completion of an investigation. They can make an exception if it's a new account, an account that is repeatedly overdrawn or if there is suspicion of fraud."

Bowen suggests the following tips for account holders:

--Read the Check 21 disclosure that arrives with your checking account statement. Banks are required to provide a disclosure statement to customers who previously received canceled checks with monthly statements no later than the first statement mailing after Check 21 becomes effective on October 28.

--Contact your bank if you have any questions about Check 21 after reading the disclosure statement. Make written notes of your conversation and file it for reference.

--Request a "substitute check" if you do not receive canceled checks with your monthly checking account statements and need a copy of a check for some reason. Substitute checks are the legal equivalent of the original paper check.

--Understand the difference between an image of your check and a substitute check. "Banks often send out image statements that show multiple checks on a single page and they are usually much smaller than the original check," Bowen says. "Check images are not governed by the Check 21 regulations."

--Evaluate your checking account needs. Perhaps a new account that was not available when you opened your current account might better suit your needs.

--Use duplicate checks to help you keep track of the checks you write if your canceled checks are not returned from your bank.

--Examine your checking account statements closely during the next few months as Check 21 is implemented. As with most new processes, there may be a few unanticipated wrinkles or problems. If you are aware of problems as they occur, you usually can resolve them faster.

"If all this sounds too confusing or complicated," Bowen says, "just remember to write checks only if you have the money in the account to cover the check and to review your monthly checking account statements as soon as they arrive for errors.” EDITORS: Contact Cathy Bowen at 814-863-7870 or by e-mail at cbowen@psu.edu.

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Writer/Editor: Gary Abdullah Office 814-863-2708 FAX 814-863-9877