Check 21 FAQ

Check 21 FAQ

How do merchants establish a Check 21 account?

For merchants clearing transactions through their own business bank, the application process is extremely simple, with little paperwork required.  Accounts are set up quickly, usually within 2 business days.  There are no reserves.

For merchants clearing through a processor account, the application process is similar to an ACH account.  You submit an application and due diligence documents including Articles of Incorporation, 2 months business bank statements, driver’s license and voided check for the account where funds will be deposited.

What types of merchants use Check 21?

Merchants across all industry categories successfully use Check 21 to process payments.  Valuable for high risk merchants, the technology is also used for online bill payment as well as insurance, mortgage, brokerages, property management and a wide variety of standard risk businesses.

How is Check 21 different than bank drafts?

Some merchants think Check 21 today is the same as banks drafts used to be.  Bank drafts got a bad reputation when unscrupulous businesses falsely created substitute checks to fraudulently debit funds from unsuspecting consumers.

These days, dedicated Check 21 processors electronically create substitute checks, also known as image replacement documents (IRD), which clear through bank-to-bank image transfer.  Substitute checks are recognized as legal banking instruments.  The creation of substitute checks is authorized under the Check Clearing for the 21st Century Act.

What are the advantages of Check 21 over ACH?

Check 21 transactions clear quicker meaning you get your money faster.  Check 21 is not subject to restrictive ACH rules which mandate chargebacks stay under 1%.  It is a good solution both for merchants that have very few returns as well as those with higher return rates.

What is a Check 21 processor account?

Clearing transactions through the processor is a good solution if you anticipate many returned transactions due to non-sufficient funds (NSF) or chargebacks.  The transactions clear through the processor’s account rather than your bank account, which protects your business account.  The processor deposits the cleared funds to your bank account.

What are the benefits of Check 21 through business accounts?

Clearing echecks directly through a business account is an excellent solution if you do not anticipate many returned transactions due to non-sufficient funds (NSF) or chargebacks.  Accounts are set up fast, with a minimum of paperwork required.  Rates are substantially lower than ACH for web based or MOTO transactions.  There are no reserves on the account

If you expect many returned items, consider clearing through a processor account instead.

What are the 2 ways for clearing Check 21 transactions?

First, you can clear the transactions directly through your business bank account.  Secondly, you can clear through the processor’s account.  The decision on which to use depends on the specifics of your business.

Is the user experience the same with Check 21 as with ACH?

Yes.  The customer opts to pay with an echeck and provides bank routing and account numbers.  The funds are automatically debited from the customer’s bank account and deposited to the merchant’s account.

What is Check 21?

Check 21 offers merchants an alternative to ACH processing.  The difference between ACH and Check 21 is way the transactions clear on the bank end.  Check 21 clears echecks through bank-to-bank image transfer rather than through the ACH network.

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