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1HE ST□Rli OF C.MELJ.S
FEDERAL RESERVE BANK OF NEW YORK
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
PAYEE
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55
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https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
IN
MY HAN17 .I HOLD ONE OF THE MOST IMPORTANT
PIECES OF PAPER IN THE WORLD... A CHECK. WE USE
CHECKS TO PAY $9 OUT OF EVERY ftO WE SPEND.
TODA'lj THERE ARE ABOUT 91 MILLION CHECKING
ACCOUNTS IN THE UNITED STATES. 1- WANT TO TELL
YOU WHAT HAPPENS TO THE CHECKS EXCHANGED
BETWEEN THESE ACCOUNTS, AND ALSO, SOME
FACTS ABOUT 'THE PAST, PRESENT, AND FUTURE
OF CHECKS.
CHECKBOOK MONEY
A TYPICAL
AMERICAN FAMILY, THE. HENDERSONS, HAS ONE OF THE 91
M ILLION CHECKING ACCOUNTS IN THE UNITED STATES. AT THE MOMENT,
MRS . HENDERSON 15 FACED WITH A SITUATION WHICH WE CAN ALL
FULLY APPRECIATE ...
H,MYGOODNESSf
N' T HAVE THE CA
IT A MINUTE, I '
A
EC
BY FILLING IN THE BLANKS OF A CHECK FORM •.•
MRS. HENDERSON SPENDS ♦ 24. 95, AS EASILY
AS IF IT WERE OFFICIAL UNITED STATES
CURRENCY AND COIN.
THANK GOODNESS WE HAVE
A CHECKING ACCOUNT! L
FORGOT I'D HAVE TO PAY
FOR THIS TODAY. I DON'T
SEE HOW PEOPLE EVER
DID WITHOUT CHECKS/
. . , - ~,:;.....,.,eci
il I DC
< '
2
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Federal Reserve Bank of St. Louis
·, 1
,
,~
'•
HERE'S
CK.
THAT15 ALL RIGHT?
YES INDEEq
MRS. HENDERSON,
A CHECK IS FINE!
MOST OF US, LIKE MRS. HENDERSON, AGREE THAT
CHECKS ARE CONVENIENT, BUT LIKE HER WE THINK
VERY LITTLE, IF AT ALL, ABOUT HOW CHECKS DO
THEIR JOB. A LOT OF MONf:Y MOVES AROUND
THE UNITED STATES BY CHECK. IN FACT,
SUMS ADDING UP TO BILLIONS OF
DOLLARS EACH DAY CRl55·CROSS
AMONG OUR CITIES AND TOWNS IN
A COMPLEX PATTERN TO SETTLE
MILLIONS OF PAYMENTS LIKE
MRS. HENDERSON 'S THAT
MAKE UP THE ORDINARY
8USINES5 OF OUR LIVES,
CHECKS ALSO SETTLE
BILLIOIS OF DOLLARS OF
GOVERNMENT AND
BUSINESS PAYMENTS.
HOW IT ALL BEGAN.•.
E'XPERTS AREN'T SURE ••• SOME SAY THE
ROMANS INVENTED THE CHECK ABOUT 352 e.c.
THE GOLDSMITH GAVE HIS CUSTOMER
11 GOLD5MITH NOTES'' (THE FORERUNNERS
OF BANK-ISSUED CURRENCY). THESE
WERE SIMPLE PEN-AND-INK RECEIPTS WRITTEN PRO\\ISES TO PAY THE CUSTOMER,
OR TO HIS ORDER. BUT IN ADDITION ...
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Federal Reserve Bank of St. Louis
OTHERS GIVE CREDIT TO HOLLAND IN THE 16T..!:!
CENTURY. IN AMSTERDAM, ABOUT 1500 A. D.,PEOPLE
LEARNED TO DEPOSIT THEIR CASH WITH "CASHIERS#
FOR A FEE, RATHER THAN RISK STORING IT AT HOME,
THE CUSTOMER MIGHT WRITE THE GOLDSMITH
DIRECTING HIM TO PAY A CERTAIN SUM
TO A PERSON~ OR TO HIS ORDER, OR.
TO THE BEARER OF THE NOTE. THE
ORDERS TO PAY DIFFERED FROM MODERN
OIECKG ONlY IN SEJNG LESS (,JNIFORM.
3
THE EARLIEST PRINTED CHECKS,
BELIEVED TO DATE FROM 17621
WERE MADE BY LAWRENCE CHILDS
IN ENGLAND. HE WAS THE FIRST
BANKER IN THE MODERN SENSE.
13UT, 13EFORE THAT, IN EN6LAN~ THE USE OF CHECKS HAD
6E6UN TO SPREAD.,. SOMEONE RECEIVING-CHECKS FROM
DIFFERENT PEOPLE DRAWN ON DIFFERENT BANKS FOUND
IT INCONVENIENT TO GO TO THE VARIOUS BANKS TO
GET PAYMENT. HE DERJSITED THE CHECKS IN HIS OWN
13.ANK, WHICH DID THE COLLECTING-. PRESENTING- CHECKS
TO OTHER BANKS WAS ACCOMPLISHED BY USE OF
MESSENGE RS.
THIS MEANT THAT EACH BANK'S MESSENGER MADE MANY TRIPS EVERY DAY TO EVERY OTHER
B
THE STORY GOES ... THAT ONE DAY A
WEARY MESSENGER STOPPED OFF ON
THE WAY AT A LOCAL COFFEE SHOP•••
4
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Federal Reserve Bank of St. Louis
AS HE SETTLED DOWN TO HAVE HIS COFFEE, HE
NOTICED ANOTHER BANK MESSENGE R ••• AND
AS IT TURNED OUT, EACH CARRIED A BUNDLE
OF CHECKS DRAWN ON THE. OTHER'S BANK.
IN THE COURSE OF CONVERSATION.,
THEY DECIDED TO EXCHANGE THEIR
BUNDLES OF CHECKS. THEY WOULD
RETURN TO THEIR OWN BANKS, THUS
SHORTENING THEIR TRIP.
SOON OTHER MESSENGERS, HEARING OF THIS
SIMPLE METHOD, STARTED TO MEET AT THE COFFEE
HOUSE ••• THEY ALL WOULD EXCHANGE CHECKS AND
RETURN TO THEIR. RESPECTIVE BANKS, SAVING
MANY EXTRA TRIPS.
WHEN THE BANKERS FOUND OUT ABOUT THIS,
MANY OBJECTED...
BUT AS TIME WENT ON, THEY REALIZED THE
VALUE OF THIS SYSTEM AND IT HAS PROVED
ITSELF OVER THE YEARS .. , TODAY THE
LOCAL'CLEARING HOUSE" 15 AN INTEGRAL PART
OF THE CHECK COLLECTION OPERATION.
THE CLEAl<ING HOUSE OPERATES ALMOST THE SAME AS THE ORIGINAL COFFEE HOUSE GATHERINGS...
BANKS SEND A DELIVERY CLERK .ANO A
SETTLING CLERK TO THE CLEARINGHOUSE. THEY BRING BUNDLES OF CHECKS,
ONE BUNDLE FOR EACH OF THE OTHER
BANKS, .AND A LIST OF THE AMOUNTS
DUE THEIR BANKS FROM EACH OTHER BANK.
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Federal Reserve Bank of St. Louis
AND THERE THEY HAND OVER THE CHECKS
Ol<AWN ON THE OTHER BANKS, RECEIVE THE
CHECKS Dl<AWN ON THEIR BANK, AND SETTLE
NET BALANCES AMONG THEMSELVES.
.5
So
THE CLEARING HOUSE SIMPLIFIES THE CHECK CLEARING OPERATION •••
B
RE
6 PAYMENTS AND 6 SEPARATE ROUND TRIPS
BY MESSENGERS BETWEEN ANY .3 BANKS.
BANK 8SEN05
BANKY•zoo
IN CHECKS...
••. AND
RECEIVES
•.• AND
••• ~D
RECEIVES
$ 30O IN
CASH
$◄ OO IN
CASH
·
RECEIVES
•zoo1N
CASH
BANKY SENDS
BANKS •100
-~ .l
IN CHECKS .•.
~ . ,.-:-:,
••. ANO BANKY
RETURNS •soo
00'+
$ 100 1N
CASH
FTER
3 NET PAYMENTS AND 3 ROUND TRIPS TO THE CLEARING
HOU5E BY MESSENGERS.
GETS
zoo
300
400
F~R
500
FROM'{
600
THE NET
RESULT OF
THE DAY'S
CLEARING •. ,
BANK 8
GETSIZOO
...
''
'
PAYS
PAYS
200
TOR
100
100·
TOS
ro
\
'\
+
NET
IIET
SETTLEMENT
SETTLEMENT
+200
_...
I
TO
•300
l!'lflllll!I!
=
11•00111
I'I ~1 ·'.I'! ~I
2200
TOTAL
THE NET
B
RESUL"T OF
"THE DAY'S
CLEARING ...
500
TOR
Y
1100
8
FROM
800
400
\
\
Y
--800
+
100
300
"400
\
FROM~
FROM
+
TO"/
'
TOTAL
700
FROM8
PAYS
I
CLEARING
HOUSE
R
li"T'~-'--=-8;.......,
GETS
+
=
700
NET
SETTLEMENT
+100
'
2200
0
-- ------ ......
SANK
Y
GETS 1100
~
,
;
;
;
,,
,j'oOAY, IN!?TEAD OF U51NG CA?H 70 ~ETTLE DIFFEl<eNCE5, Nf=T
THE NET RESULT OF
THE DAY'S CLEARING ...
BANK R OWES .300
6
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Federal Reserve Bank of St. Louis
~f:iTLEMENT5 ARE MAD!: IN 01:MANO OEPOGIT ACCOUNT?;;
CLE'ARING HOU$!: f3AN1<$ MAINTAIN AT THE RE5ERV!: 9ANK.
CHECKS~Ute UNITED STATES
MORE CHECKS ARE U5ED IN THE UNITED STATES TODAY THAN IN ANY
OTHER COUNTRY. 'THEIR HISTORY HERE BEGAN IN 1681 WITH A FAMOUS
EXPERIMENT CALLED 11 THE FUND AT BOSTON IN NEW ENGLAND:' TO MEET
THE SHORTAGE OF HARD CASH FOR TRADE, THE BUSINESSMEN OF
BOSTON MORTGAGED THEIR LANO AND WARES TO THE FUND. THEY IN
TURN RECEIVED A CREDIT AGAINST WHICH THEY COULD DRAW CHECKS.
THE MERCHANTS HOPED
THAT USE OF THESE
CHECKS WOULD SPREAD
AMONG THE PUBLIC.
CHECKBOOK MONEY IN
THE COLONIES, HOWEVER,
WAS SOON REPLACED 6Y
PAPER CURRENCY WHICH
BETTER SUITED THE
NEEDS OF THE TIME.
ONLY AFTER THE REVOLUTIONARY WAR,WHEN DEPOSIT BANKING BECAME ESTABLISHED,, DID
CHECKS COME INTO WIDESPREAD USE. SY THE TIME OF THE CIVIL WAR, WITH THE GROWTH
OF CITIES, IMPROVED TRANSPORTATION AND CHEAP UNIFORM POSTAL RATES, CHECKBOOK
MONEY HAD SURPASSED BANK NOTE CURRENCY IN VOLUME .
·
BUT THE COUNTRY LACKED A CENTRAL CLEARING MECHANISM FOR CHECKS. BANKS THAT
HAD l=REQUENT TRANSACTIONS WITH EACH
OTHER SET UP ACCOUNTS WITH EACH OTHER
AND THUS CHECKS WERE HANDLED WITH EASE
BETWEEN SUCH ~CORRESPONDENT'' BANKS.
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Federal Reserve Bank of St. Louis
HOWEVER, SOME 6ANKS CHARGED THE PRESENTING OUT-OF-TOWN BANK A FEE CALLED AN
11 EXCHANGE CHARGE •11
THESE CHARGES WERE A MA.JOR SOURCE OF INCOME
TO MANY BANKS••• BUT THE. CHAR6ES MADE A CHECK
DRAWN ON, SAY, A CHICAGO 6ANK,WORTH LESS IN
NEW YORK THAN ITS FACE VALUE.
7
'ifo
AVOID THE EXCHANGE CHARGE,A 8ANK WOULD 5E'NO OUT-OF-TOWN Cl-lECk'$10A 11CO~ESPONDENT"
0ANK RATHER THAA 0Y "THE MOST OIRECT ROUTE. THE CORRESPON0E:NT WOU!..O IN TURN Gl:ND THE
CHECK TO ONE OF ITS CORRE5PONOE'NT5 ••• THE RESULT- CMECKS $0METIMES TOOi< A LONG
TIME' TO eE COLLECTED ANO WENT A ROUNDABOUT WAY- •• .,.,.,.,-;
.--1 - - - - - - - - - -
,--cHECJ<.-- .
\
\
1•
•
\ Y,~
' ~-
HERE: I~ ONE EXAMPLE': A CHE:CI< DR.AWN ON A
NORTH BIRMINGHAM BANK ANP C,EPOS/TED IN A
EIIRMINGHAM SANK 4 MILE$ AWAY, TRAVELED
~.;oo MILES AND "TOOK 14 OAYS TO GET 10 THE
0ANK ON WHICH IT WAS PRAWN.
THE CHECK WENT FROM BIRMINGHAM TO ,JACt<$0NVIL~E ANC, THEN ,P PH/1.AC,ELPHIA TO GET70
NORTH BIRMINGHAM. IF PAYMENi WA'S RS:USEO)
IT Tl<AVE'LE'P ii-IE SAME ~UTE IN REVERSE iO
GE:T SACK iO 91RMINGHAM,
L.I . CITY
(DEFOSIT) HOBOKEN
RIVERHEAD
PORT .JEFFERSON
8
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Federal Reserve Bank of St. Louis
ANOTHER EXAMPLE IS THAT OF A CHECK ~AWN ON A
q,AG HARBOR 1 N,Y. f3ANK AND DEPOSITED IN HOBOKEN,
N.J'. 93 MILEG AWAY, THAT ~SSED iHROUGH 1l SANKS,
TRAVELED 11 ~3.3 MILES IN 11 PAYS 10 AVOID EXCHANGE
CHAFa:;ES. TODAY IT WOULD GO 93 MILE'~ IN LESS THAN
iWO DAYS, IF CO!-LECTEP iHROLJGH '"Tl-IE FEDE:RAL
RESERVE 0ANK OF NEW YORK.
THE FEDERAL RESERVE SYSTEM
~E ACT PROVIDES THAT EACH FEDERAL RESERVE BANK
SERVE AS A CHECK CLEARING AND COLLECTION CENTER FOR
THE BANKS IN ITS DISTRICT THAT HAVE ACCOUNTS WITH IT.
THE SYSTEM PROVIDES A NATIONAL CLEARING MECHANISM
THAT ELIMINATES THE LENGTHY REROUTING AND EXCHANGE
CHARGES ON CHECKS. A MEMBER BANK THAT RECEIVES
CHECKS PAYABLE OUT OF TOWN MAY NOW CLEAR THE CHECKS
THROUGH ITS FEDERAL RESERVE BANK OR BRANCH OR CITY
CORRESPONDENTS. CITY BANKS ENCOURAGE THEIR COUNTRY
BANK "COUSINS'' TO USE THEIR SPECIAL COLLECTION FACILITIES.
THE CORRESPONDENT BANKING NETWORK AND THE !=EDERAL
RESERVE SYSTEM WORK HAND IN HAND TO PROCESS THE EVERRISING VOLUME OF CHECKS THAT NEED TO BE COLLECTED.
WHEN PRESIDENT
WILSON SIGNED THE
FEDERAL RESERVE
ACT IN 1913, A NEW
ERA BEGAN IN lHE
S TORY OF CHECKS
IN THE UNITED
S TATES .
DURING 1971 THE FEDERAL RESERVE SYSTEM
HANDLED MORE THAN 7. 7 BILLION CHECKS,
AMOUNTING TO OVER. 3-8 TRILLION DOLLARS.
ALSO/ OF COURSE,MANY OTHER CHECKS
WERE COLLECTED BY CITY CORRESPONDENT
BANKS, OR LOCAL CLEARING HOUSES, OR BY
DIRECT PRESENTATION FROM ONE BANK
TO ANOTHER _
THE FEDERAL
RESERVE SYSTEM
DISTRICTS AND BRANCH TERRITORIES
®
'--'Ir---~ ·-·"A,Hn·
,-
'
:
0
,
i "'
~HAWAII
.., ~
,
!::,
L
®
{) j
PUl:11.TO RICO AND
VIRGIN ISLANDS
:l
:
0
•
-
*
IL...._ _ _ _ _ _ _ _ _ _ _ _ _ l'•
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
FEDERAL RESERVE. BANK CITIES
FEDERAL RESERVE BRANCH CITIES
BOUNDARIES OF FEDERAL RESERVE DISTRICTS
BOUNDARIES OF FEDERAL RESERVE BRANCH TERRITORIES
BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
NOTE.: PUERTO RICO AND VIRGIN ISLANDS INCLUDED IN 2@ DISTRICT
FOR CHECK CLEARING AND COLLECTIONS.
9
DOLLAR-SWITCHING
To
MOVE MONEY AROUND, A CHECK HAS TO FIND A SINGLE SET OF 6001<5 SOME ·
WHERE-A DOLLAR - SWITCHING CENTER IN THE PAYMENTS CIRCUIT-WHERE A BOOKKEEPER
CAN SUBTRACT THE AMOUNT OF THE CHECK FROM ONE ACCOUNT AND ADD IT TO ANOTHER.
HOW 7#£ SYS7~M WOl<K~
lOC4l CENTERS ... PEOPLE AND ORGANIZATIONS HAVE THEIR DEPOSITS IN COMMERCIAL
SANKS. A BANK SERVES AS A SET OF BOOKS FOR ITS CUSTOMERS, AND A CLEARING
HOUSE DOES THE SAME FOR LOCAL BANKS.
HMIONAL ANO NATIONAl CENTERS ... LOCAL BANKS, IN TURN, HAVE DEPOSITS AT
FEDERAL RESERVE OR CORRESPONDENT 6ANK5, OR BOTH. TRANSACTIONS ARE. SETTLED
AT THE RESERVE AND CORRESPONDENT BANKS BY CREDITING THE SENDING, AND
DEBITING ntE RECEIVING, 8ANKS 1 DEPOSIT ACCOUNTS.
FEOERAl RESERVE CENTERS... FEDERAL· RESERVE BANKS PAY EACH OTHER FOR THE RESULT5
OF THEIR NUMEROUS DAILY TRANSACTIONS WITH ONE ANOTHER BY SETTLING NET BALANCES
- THE FINAL RESULTS OF EACH DAY'S TOTAL DOLLAR-SWITCHING-ON THE BOOKS OF THE
INTERDISTRICT SETTLEMENT FUND THEY MAINTAIN IN WASHINGTON.
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Federal Reserve Bank of St. Louis
TO see· HOW THE FEDERAL RESERVE SYSTEM FITS TOGETHER, LET'S
TRACE A CHECK THROUGH ITS COLLECTION ANO CLEARING FACILITIES -SuPR::>SE MRS. HENDERSON, LIVING IN ALBANY, N. Y., BUYS A PAINTING
FROM AN ART DEALER IN SACRAMENTq CALIFORNIA.
SHE SENDS
HER
-
CHECK
THE , A ~DEPOSITS THE
CHECK IN HIS ACCOUNT AT
A SACRAMENTO BANK.
Jl!.6tt1t!f
.Bank
of
SacrameKto
Ea1tk
I@
THE FEDERAL RESERVE BANK
OF NEW YORK FORWARDS THE
CHECK TO THE ALBANY BANK
WHICH DEDUCTS THE AMOUNT
OF THE CHECK FROM MRS.
HENDERSON'S ACCOUNT.
THE SACRAMENTO BANK
DEPOSITS THE CHECK FOR
CREDIT IN ITS ACCOUNT
AT THE FEDERAL RESERVE
BANK OF SAN FRANCISCO.
Feaerat
:Reserve
Baxkof
.Kew Yon€.
THE FEDERAL RESERVE BANK
OF SAN FRANCISCO SENDS
THE CHECK TO THE FEDERAL
RESERVE BANK OF NEW YORK
FOR COLLECTION •
J11terdistn'ct Settlement 3'ud
i
I
0
6ANK.
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Federal Reserve Bank of St. Louis
Baxk of
Sax Francisco
f)
THE ALBANY
BANK AUTHORIZES
THE FEDERAL
RESERVE BANK
OF NEW YORK
TO DEDUCT THE
AMOUNT OF
THE CHECK FROM
ITS DEPOSIT
ACCOUNT WITH
THE RESERVE
Federal
Reserve
THE FEDERAL
@
Tue. FEDERAL RESERVE BANK OF NEW
YORK PAYS THE FEDERAL RESERVE BANK
OF SAN FRANCISCO BY PAYMENT FROM ITS
SHARE IN THE INTERDISTRICT SETTLEMENT
FUND.
RESERVE BANK
OF SAN FRANCISCO
CREDITS THE
S.ACl?AMENTO
BANK'S DEPOSIT
ACCOUN1AND
THE SACRAMENTO
BANK CREDITS
THE ART DEALER'.s
ACCOUNT.
11
THE CENTRAL NERVOUS SYSTEM OF THE FEDERAL RESERVE JS ITS ELECTRONIC WIRE
TRANSFER SYSTEM. IT LINKS THE RESERVE BANKS WITH EACH OTHER AND "THE
INTERDISTRICT SETTLEMENT FUND. THROUGH IT MONEY 15 CONSTANTLY BEING TRANSFERRED FROM ONE RESERVE BANK TO ANOTHER ••• ALMOST #60 BILLION A DAY.
(~
(
P/../ILAPEi.PHIA
WA5HING70N
JU
RICJIMONO
CUI-PEPER
~,,,,-_.,._ COMMUNICATION~ CENTER.
Ait..A~
PAL~\
.M.ucH OF THIS IS
SETTLEMENT FOR COLLECTED CHECKS, BUT
IT ALSO INCLUDES TRANSFERS OF FUNDS FOR MEMBER
TREASURY.
BANKS, THEIR CUSTOMERS, AND THE.
u_s_
THE COST OF COLLECTING AND CLEARING CHECKS 15 A MAJOR PART OF RESERVE
BANI< EXPENSES. BUT, CONSISTENT WITH THE IDEAL OF A MONEY THAT CIRCULATES
AT THE SAME VALUE THROUGHOUT THE COUNTRY, THESE AND OTHER SERVICES ARE
RENDERED FREE O_F CHARGE •••
To SUM
UP THE ELEMENTS OF OUR CHECK COLLECTION OR DOLLAR SWITCHING
SYSTEM, 'THEN, WE HAVE •••
,..
-
r. ;,
~
PAYEE
DEPOSITS
CHARGE
AGAINST
AC.COUNT
,..
(o
..
~
...,
,._____...
."
....__..
DRAWEE
BANK
PAYMENT
CREDIT
CHECK
FEDERAL
RESERVE
BANK
..:!:..
CREDIT
PAYEE'S
BANK
-MONEY MOVING AROUND Tt:IE COUNTRY IN BILLIONS BY TRANSFER OF CREDIT FROM
ONE BANK ACCOUNT TOANOTHER-CHEAPL~ QUICKLY, AND SAFELY TO PROMOTE COMMERCE.
12
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Federal Reserve Bank of St. Louis
N
EARLY 24 BILLION CHECKS WERE Wl21TTEN IN 1971, TrlAASFERRING TRILLIONS
OF CHECl(900t( '70LLARS AAOUNO THE NATION. ASSUMING NONE OF THE CHECKS
WERE WRITTEN ON WEEKENDS OR HOLIOAYS, THAT'S SOME 95 MILLION CHEQ(S
EACH BUSINESS aAY. COLLECTING THESE CHECKS QUICt(LY IS A VERY SIG JOB-ANO IMPORTANT
THE EFFICIENCY OF OUR MONEY. SYSTEM. LET'S LOOK AT
THE FLOW OF CHECKS THllOUGH ONE OF THE BUSIEST CHECK-PROCESSING
OPERATIONS IN THE NATION AT•••
ro
OTHER FEDERAL RESERVE
BANKS - 6 °/o
EACH BIJSINE55 DAYl
AT THE FEDERAL RESERVE BANK OF NEW YORK THE TREMENDOUS VOLUME OF CHECKS
15 HANDLED IN THIS WAY.
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Federal Reserve Bank of St. Louis
BUNDLES OF CHECKS ARRIVE FROM BANKS TO
BE CREDITED TO THEIR ACCOUNTS.
13
ATTACHED 1t) EACH PACKAGE INTHE
9UNDLE 15 A TAPE Ll$TING THE
AMOUNT OF EACH CH!:CK.
E:ACH BANI< AL$0 SENDS A ncA5fi
LETTER'' WHICH 8EARGTHE iOTAL
OF AI-L THE PACl<AGE5. TME
FEPEK'AL RESERVE 9ANK VERIFl5
iHI, AMOUNT AND CRl:01"1':S iHE
DEPOSITING 8ANK •
@HECK PF?OCEG51NG IS AUTOMATE'D, HIGH-SPEE!? ELECTRONIC MACHINES ~ CHl:CKS BY 11 RE:APING"
MAGNETIC INK CMARACTERS PJ:<INTEP AL.ONG THE 90TTO'o\ OF CM!:CKS: • • • AT A GPEEI? OF AEJOUT
6,01 000
CMECl<'S AN HOUR,
GERALDS.FOWLER
50-226
ANYPLACE, N.Y. 00055
I
~
July 7,. _7;i._
T)AY TO THE
rOJU>m oF
/"~
J ·
p?
• • ,,
~~
c-~~~ ~ !5;-;,
100
I
CM£CK
213
ROUTING
BLANK BANK
3110 0 2 u,,:
'2 31. 111 076Bq11•
~00000 ,o 2q5,,•
,
11
•
£ L:•-<...'~
T/.IE FIR:-T 'TWO DIGIT$ ARE
EJLANK 8ANK'G FEDERAL
Rl:SERVE DISTRICT NUM0ER,
THE THIRD PIGIT ISi/.1~ Fl:l?El?AL
f?E51:RVE OFFICI: (HEAP OFFICE
~ !JAANCH) ORiHE DESJGNA'TION OF A GPSCIAL. COU..E:CTION
ARRANGEMENT. THE FOURTH
DIGIT PE!:>IGNATI:$ 61-ANK
!:JANt<'S !:>TATE OR A GPECJAL
COL..L.l:CTION ARRANGEMENT.
DOLLARS
-
~~fl=~
ANYPLACE,N .Y.00055
,:o 2 '
$ /OJ-lf;;
~
\.'.
POLLAR AMOUNT
61.ANK 0,At,11<'5
••• USUALLY ENCODED
IPENTIFICATION
IN MAGNE:TIC INK
CHARACTERS 8YTHE
FIR':i>T BANK TO RECEIVE
THE: CMECK,
NUMBER,
MR. FOWI.E'R'$
ACCOUNT NUMBER.
BLANK BANK'S IDENTIFICATION NUM8ER (NUMERAroR)
OVE'R IT5 CHECI< ROUTING 5YMEJOI. ( DEIJOMINATOR ).
80TH PART$ ARE' ENCODED IN MAGNETIC INK ACROSS
THI: EJO'TTOM OF iHE CIIEiCI< , E'>(CEPT THE FIR5r TWO
DIGITS OF TIIE NUMEiRATOR. "THESE DIGITS ARE
cm,; <;;TATE OR OTHl:R TERRl'!ORJAL Df:SIGNATIONS.
N{EOEO FOR HAND PROCE$51NG 81JT NOT FOR
E'LECTRONIC $ORTING.
11
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Federal Reserve Bank of St. Louis
HE CHECKS ARE FED INTO MACHINES THAT...
THE MACHINE
THEN SORTS
THE CHECKS
INTO COMPARTMENTS WHICH
REPRESENT
EITHER SINGLE
BANKS OR
GROUPS OF
BANKS.
SOME
CHECKS
ARE
REJECTED.
WHEN THE WHOLE PROCESS 15 COMPLETED, THE MACHINE'S TABULATION IS
RECONCILED- TO THE 6CA51-1 LETTER,, TOTAL SENT BY' THE DEPOSJ"FING- BANK.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
15'
AFTER VERIFICATION, THE CHECKS ARE PACKAGED AND SENT ON THEIR WAY BY ROAD, RAIL,
AND AIR. FASTER TRANSPORTATION HAS SPEEDED UP CHECK COLLECTION.
HowevER, SOME CHECKS CANNOT COMPLETE.
THEIR INTENDED TASKS •••
ABOUT
ONE
OUT OF EVERY
200 CHECKS PASSING
THROUGH THE SECOND
DISTRICT CLEARING
OPERATION IS
RETVHNEO TO THE
·PEPOSITING BANK
Mosr OF THESE
CHECKS ARE
IMPROPERLY
ENDORSED OR
ARE PRAWN ON
ACCOUNTS WITH
INSUFFICIENT
FUNDS •
•
SOME ARE
FORGERIES, A
CRIMINAL OFFENSE.
8
A FEW ARE a-tECKS WRITTEN
ON NONEXISTENT ACCOUNTS.
8
PAYMENT HAS BEEN STOPPED
ON OTHERS •
•
SOME ARE PATED AHEAD OF TIME.
16
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Federal Reserve Bank of St. Louis
1"ME NUMBER OF CUECl<S WRITTEN_ INCREASES ASOUT
7
PER CENT EACU YEAR.
81UIONS
60r--------------------
50 1-------......:...------------=
lfOt------------~~ ~ - -
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
AT THIS PACE WE CAN ANTICIPATE NEARLY
I
BUT SUCH A LARGE VOLUME' MAY BE IMPRACTICAL
TOHANOLE .
f HANDLEI' COMPLETELY ewTHE9ANl<e;.'
PAY
WHEN MOST PAYMEN"JS WILL 8E
COMPUTERs; LINKED ,oGcTIIER AIIIP
TO THEIR CUS'Tt>MER5 9Y AN ELECTRONIC COMMUNICATIONS NETWORK,
IN !?UGH AN ELECTRONIC PAYME:NTS SY5TEM I M06T PAPER CHl:Cl<5
COULD 0£: EL.IMINATEO,
OME PEOPI.E FORE5EE
17
g
fl,ooKtNG SACK it> T-J,/E iYPICAL. AMl:RICAN FAMILY, MRS.
HEN PERSON MIGHT EVENTUALLY BE ABLE' -n:, PAY FOR
HER c.o.D. PACKAGE: FRar\ FIT.Z'HUGH'S DE'Fl'\RTMENT
SWRE PIRECTLY FROM HER HOME" USING iHE ELECTRONIC
PAYME'NTS SYSTE=M.
HENDERSON ACCT.-$24.95
FITZHUGH ' $ BANK+ $24.95
TME COMPUTER WOULD VERIFY MER IPENTITY
(PERHAPS BY VOICE), CHARGE HER &ANK
PEMANP ACCOUNT, AND PAY FITZHUGH'5 EWII< FOR
C~DIT "TO "THE S"IORE''S ACCOUNT,
SHE NIAY 91: A9LE101'AANSMIT l-11:R PAYMENTS OVER ,
ORDINARY TELEPHONE LINES CONNECTED 70 UE'R eANl<S
COMPUTE:R,
-
~T OF THE' HENPE'RSONS' RECEIPT$ AND ~YMENTS WILL SE MADE EL.EC"TRONICAL.LY 8YTHEIR BANI< WITIIOUi
THE U5E: OF CUECl<S. ANP AT THE END OF E:ACH MONTH, A RECORD OF iMESE TRAN5'ACTIONS WIU.. SE
PRINT'ED 8Y THE 6ANK1S COMPUTER ANO MAILED TO THEM.
DEMAND ACCOUNT 435-72-2485
MR AND MRS J.C. HENDERSON
ll SUNSET DRIVE
ANYPLACE, N.Y. ooo 55
BLANK BANK
Anyplace,N.Y. 00055
--~----------------------- -----------Amount -------------
--------------------------------::=:
Transaction
--- Da~;-------------------$ -1000.43
----------------------OPENING BALANCE ________________________ ____________ _
-;;~L
30
______________________ __________
RECEIPTS
-----_
--------------------------- ----------------------------------------15-"8
MAY~
MAY
MAY 5
MAY 23
BLANK BANK
BIG CITY MANUFACTURING
CORP.
ABC CORP.
ANYPLACE FURNllURE CO.
$
1235.75
27.30
-41.12
1319.65
t
------------------~~~~~;------_________ -~;;;;====-------=========-----------====-----MAY l
~:~
!
MAY 10
MAY 15
MAY 18
MAY 28
----,-,AY
31
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
-------------------
ANYPLACE SAVlKGS BANK
BLANK BANK
FlllHUGH'S DE~l STORE
LOCAL PO•ER C •
XVl f lNANCE CO.
ANYPLACE FOOD MART
FOUR CORNERS GARAGE
CLOSING BALANCE
-
-------------
210.50
100.00
24.95
32.60
100.00
160. 38
33.28
--------s 121. 71.
$
~
-------
1592.37
-----------------------,<;.CIENTl!7TS, !3ANKERS, t.AW'>'e"RS AND EQUIPMENT
MANUFACTURE'RS WILL. HAVE TO GET it:>GETME'R ON PLANNING
[iuT
AND DEVEL.OPMENT 61:FORE SUCI{ A SYSTEM CAN 81: PUT
INTO OPERATION.
Ulossarg
• ~~
~--ASSETS CONSIST OF PROPERTY AND CLAIMS PtGAINST OlHERS. _ \ .- ~
ASSET- ANYTHING OF VALUE /S AN ASSET OF THE OWNER.
CASH /.ETTER-A 17EP051TTICKET WITH CHECKS THAT ARE TO BE
CREDITED TO THE DEPOSITING BANK'S ACCOUNT.
~r.r-
~
In\
~~
\
CENTRAi. BANK-A BANK WHICH DEALS CHIEFLY WITH
OTHER BANKS IN HOLDING THE BANKING RESERVES OF
ITS COUNTRY OR DISTRICT AND REGULATING AVAILABLE
BANKING CREDIT. CENTRAL BANKS ARE USUALLY
GOVERNMENT AGENCIES AND OPERATE IN THE BROAD
PUBLIC INTEREST. IN THE UNITED STATES, CENTRAL
BANKIN6 FUNCTIONS ARE CARRIED ON BY THE
TWELVE REGIONAL FEDERAL RESERVE BANKS UNDER
THE SUPERVISION OF THE SOARD OF GOVERNORS
OF THE FEDERAL RESERVE SYSTEM. IN MOST OTHER
COUNTRIES A SINGLE INSTITUTION FUNCTIONS AS A
CENTRAL BANK.
CHECK- A WRITTEN ORDER INSTRUCTING A BANK TO
a
"
'
~~-- -j @
PAY MONEY. IT 15 DRAWN ON A DEPOSIT ACCOUNT
PAYABLE ON DEMAND. A CHECK MAY BE TRANSFERRED
FROM ONE. PERSON TO ANOTHER BY ENDORSEMENT.
c~eARING HOUSE- AN ORGANIZATION, ESTABLISHED
BY BANKS IN THE SAME LOCALITY, THROUGH
', l
WHICH CHECKS AND OTHER INSTRUMENTS ARE
EXCHANGED AND NET BALANCES SETTLED.
COMMERCIAL. BANK- A FINANCIAL INSTITUTION THAT
ACCEPTS DEPOSITS THAT ARE TRANSFERABLE BY
THE DEPOSITOR'S CHECK. THE BANKS MAKE LOANS
TO BUSINESS CONCERNS, FARMERS, AND INDIVIDUALS.
THEY ARE MAJOR INVESTORS IN GOVERNMENT
SECURITIES, AND IN MUNICIPAL AND CORPORATE
BONDS, AND PROVIDE VARIOUS FINANCIAL SERVICES
TO CUSTOMERS.
CORRESPONOENT BANK- A BANK THAT SERVES
AS A DEPOSITORY AND PERFORMS BANKING
SERVICES FOR OTHER BANKS, USUALLY LOCATED
OUT OF. TOWN.
CREDIT- A SUM A BANK MAKES AVAILABLE IN AN
ACCOUNT.
CUllRENCY- COIN OR PAPER MONE~ ISSUED BY A
GOVERNMENT OR CENTRAL BANK,. WHICH CIRCULATES
AS A LEGAL MEDIUM OF EXCHANGE.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
,,
~
~
PEBIT- A CHARGE AGAINST A BANK DEPOSIT ACCOUNT.
0£MANO OEPOSIT- A DEPOSIT IN A BANK WHICH MAY BE
WITHDRAWN WITHOUT ADVANCE NOTICEj FOR EXAMPLE,
MONEY IN A CHECKING ACCOUNT. DEMAND DEPOSITS
CONTRAST WITH TIME DEPOSITS, WHICH ARE NOT
SUBJ'ECT TO WITHDRAWAL BY CHECK AND MAY REQUIRE
ADVANCE NOTICE BEFORE FUNDS CAN BE WITHDRAWN.
PRAWEE BANK- THE BANK UPON WHICH A CHECK IS
DRAWN.
E'KCHANGE CHARGE- A CHARGE MADE BY THE DRAWEE
BANK FOR ITS SERVICES IN PAYING CHECKS AND OTHER
INSTRUMENTS PRESENTED TO IT. THE FEDERAL
RESERVE ACT FORBIDS DRAWEE BANKS TO MAKE
SUCH CHARGES AGAINST FEDERAL RESERVE
BANKS ON CHECKS IN PROCESS OF COLLECTION. THE
•
PURPOSE IS TO ASSURE THAT CHECKBOOK MONEY
WILL BE PAYABLE THROUGHOUT THE COUNTRY AT ITS
FACE VALUE.
F0RGEO CHECK -
A CHECK WRITTEN OR SIGNED FRAUDULENTLY
IN THE NAME OF EITHER A REAL OR A FICTITIOUS PERSON.
LEGAL. TENPER- ANY MONEY THAT MUST, BY LAW, BE
ACCEPTED IN PAYMENT OF DEBTS. CHECKBOOK MONEY
IS NOT LEGAL TENDER.
t.lAB/l/TY-THE OPPOSITE OF AN ASSET; A DEBT.
DEPOSITS IN A BANK ARE. OBLIGATIONS OF THE. B'ANK
TO ITS DEPOSITORS.
MEMBE~ BANK- A COMMERCIAL BANK THAT 15 A MEMBER
OF THE FEDERAL RESERVE SYSTEM • ALL NATIONAL
BANKS ARE AUTOMATICALLY MEMBERS OF THE SY.STEM,
WHILE STATE BANKS MAY BE ADMITTED. BY LAW,
MEMBER BANKS MUST HOLD RESERVES ( CONSISTING
OF THEIR OWN VAULT CASH ANO DEPOSITS WJTH THEIR
FEDERAL RESERVE BANK) EQUAL TO A PERCENTAGE
OF THEIR CUSTOMERS' DEPOSITS.
PAYEE-THE PERSON OR ORGANIZATION TO WHOM A
CHECK OR DRAFT OR NOTE IS MADE PAYABLE. THE
PAYEE'S NAME FOLLOWS THE EXPRESSION 11 PAY TO
THE ORDER OF_ 11
20
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
W/llTE YOUR CHECK ct.EARJ. Y ANO COMPI.ETEJ.Y••. PON'T iEAVE ANY &.ANKS. AFTER YOU
HAVE FltJ.EO OUT 7HE STUB IN YOUR CHECKBOOK ANO COMP/.ETEO THE A'll1'1/METIC
(TO MAKE SURE YOUR BAI.ANCE COVERS THE CHECK YOU PLAN . 'TO QHAW.J.., WRITE
THESE FIVE ITEMS IN INK ON THE FACE OF THE CHECK:
1
THE OATE YOU WRITE THE CHECK. NEVER
WRITE A FUTURE DATE.
2
THE PAYEE'S NAME AFTER "PAY
TO THE ORDER OF • 11
4
3
THE AMOUNT IN WORDS AS
FAR TO THE LEFT AS POSSIBLE.
FINISH THE 5PACE WITH A LINE.
THAT PREVENTS THE INSERTION
OF WORDS THAT INC~ASE
THE AMOUNT.
THE AMOUNT IN NUMBERS .
CLOSE TO THE..$ SIGN • IF
THESE NUMBERS DO NOT
AGREE WITH THE AMOUNT
IN WORDS, YOUR BANK
WILL PROBABLY PAY THE
AMOUNT IN WORDS, BUT
THIS WILL TAKE EXTRA TIME .
5
YOUR SIGNATURE. IT SHOULD
MATCH THE ONE FILED WHEN
YOU OPENED THE ACCOUNT.
DON 'T SIGN UNTIL YOU ARE
SURE THAT THE CHECK SAYS
WHAT YOU MEAN .
PON'T CROSS OUT OR CHAN6E ANY PART OF YOUR CHECK. I~ )It?(/ MAKE A MISTAKE,
START A NEW CHECK. DON'T UNO YOUR CHECK FORM TO OTHERS.
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
TO CASH, DEPOSIT, OR TRANSFER TO SOMEONE
f=LSE A CHECK PAYABLE TO YOU, YOU •ENDORSE"
IT. SIMPLY WRITE YOUR. NAME (AS IT APPEARS
ON THE CHECK) ON THE BACK AT THE LEFT END.
/F THE fORM DIFFERS FROM THE WAY YOU
REGULARLY SIGN, YOU MAY ADD YOUR PROPER
SIGNATURE. UNLESS YOU ENDORSE WITH A
RESTRICTIVE PHRASE LIKE 11 FOR DEPOSIT ONLY,"
THE ENDORSED CHECK IS THE SAME AS CASH .
https://fraser.stlouisfed.org
Federal Reserve Bank of St. Louis
FEDERAL RESERVE BANK OF NEW YORK
Public Information Department
33 Liberty Street• New York, N.Y. 10045