The Paper (and E-) Trail

How paper and electronic payments become money:
Paper Check
Consumer writes check to retailer. It then goes to the retailer’s bank to clear. One of these three scenarios can occur:
1. If retailer’s and consumer’s bank is the same, this is the end of the line for the check.
Up to 36 hours to clear
2. The check is sent to a Federal Reserve Bank within a designated “area of responsibility” if retailer’s and consumer’s banks are within this area. The check is then sent to the consumer’s bank.
Up to 48 hours to clear
3. If the “area of responsibility” is different from retailer’s bank, check is sent overnight to the appropriate Federal Reserve Bank, where it is then sent to the consumer’s bank.
Up to 72 hours to clear
 
Electronic Check
1. Consumer sends e-payment to retailer through Web site using credit or debit card:
Retailer contacts consumer’s bank for electronic fund transfer.
As little as a few seconds
2. Consumer pays bill through bank Web site or other online payment service:
If retailer is set up to accept electronic fund transfers, funds are automatically deducted.
Less than 6 hours
3. If the retailer does not accept electronic fund transfers, the bank or other online service cuts a check, where it goes through one of the three processes of a paper check.
Up to 72 hours to clear