Check 21 Processing Explained

Instabill.com provides retail and e-commerce businesses with a variety of payment processing services. Our most popular service–our completely customizable merchant accounts–are great solutions for hard-working merchants to obtain credit card processing capabilities. However, we offer a number of other merchant services, including Check 21 processing.

Apply for Check 21 Processing Today

If you know you need Check 21 processing solutions, you’ve come to the right place. Instabill can help merchants get started with Check 21 in just a few business days. Click the button above to start the application process, or simply contact a live representative today if you have more questions. Keep reading below for more information about Check 21.

What is Check 21?

Check 21 is a form of electronic payment processing that involves creating a digital version of a paper check to submit as a payment. Digital forms can be rendered as images, and can often be far cheaper to process compared to submitting paper checks. Here is how Check 21 works:

• 1. A customer’s check is scanned and rendered in a digital format.
• 2. Data from the check is sent to the Federal Banking System to process.
• 3. Once the payment is approved, the customer’s checking account is debited. The funds are then transferred to the merchant’s account.

Check 21 has been embraced for its low cost and proven method. Like ACH processing, Check 21 processing is often far less susceptible to fraud.

Benefits of Check 21 Processing

You may be wondering why Check 21 is worth the time. While not as fast as credit card processing, being able to process Check 21 payments certainly has its perks.

The main benefit of Check 21 is the convenience for merchants. Rendering checks in digital form and submitting them for payment is much easier than dealing with piles of paper checks. Check 21 payments reduce processing delays often caused by the large costs and time needed to move paper checks around. Images of checks can be sorted faster and require less hardware, thus getting money to the merchant account much more quickly.

Another benefit of Check 21 is the convenience for consumers. No more worrying about losing paper checks or shredding copies–Check 21 creates a digital “substitute check” that is verified as a legal equivalent to the original item. This often allows consumer’s checks to be returned to them upon payment, or even by web, email, or CD/DVD.

Check 21 is a great payment processing solution for high risk e-commerce industries, such as pharmacies, credit repair, collection agencies, and more.

Check 21 Stipulations

Despite Check 21 being a much more convenient alternative to paper checks, there are a few rules that consumers, merchants, and financial institutions must follow to ensure the process stays safe and functions properly.

1. The substitute check must bear the following statement: “This is a legal copy of your check. You can use it the same way you would use the original check.”
2. Substitute check must consist of an image of both sides of the original.
3. Substitute check must have an MICR line with the information contained on the original check.
4. Original check must meet industry standards for physical characteristics such as the quality of paper stock and size.
5. Substitute check must be able to be processed automatically in the same manner as the original check.

Keep in mind that the Check 21 legislation does not require banks to provide or accept check images–they can continue to process paper checks. The Check 21 legislation also does not force any regulations for controls on participating banks–it is up to individual institutions to develop bilateral agreements to facilitate information exchanges.