When I deposit a payroll check at the bank what does the bank do withthe physical check?

[Techrescueff]

[WindAtMyBack]

I studied banking like 40+ years ago. I'm sure things have changed since then. But the basic idea has stayed the same.

Let's say the check is written on Bank A ( your employer's bank ) and you deposit it in your account at Bank B. So Bank A owes Bank B some money.

IF both banks are local, representatives from those banks will physically meet somewhere every morning and "trade" checks. By physically meeting, I mean they are sitting around a table in an office somewhere in the city.

So Bank A has some checks from Bank B. Bank B has some checks from Bank C, etc. There might be a dozen banks at this meeting every morning. Most of them will cancel each other out.

Let's say Bank A has $10,000 in checks from Bank B. And Bank B has $11,000 in checks from Bank A. So Bank B owes Bank A $1000.

After all this is resolved, the physical checks get returned to the bank they were written on - in this case meaning the bank your company has their payroll account with.

What happens to those physical checks is up to the bank. They might destroy them. They might take a picture of them before destroying them.

In the old days ( like when I was young ), the physical checks were returned to the person or company who wrote them. So every month I would get mail from my bank that had the physical checks.

I got the physical checks every month. These were the physical checks that I wrote.

Now, the physical checks are not returned to the writer of the check. I don't know what the bank does with them, but they are probably destroyed after a period of time.

If both banks are NOT local, it goes through the Federal Reserve System. The short version is that the Federal Reserve system is a system so all the banks do not have to get together physically in one location and trade checks.

If you look at the back of the checks, you will see the route it took. The check will physically be sent to the Federal Reserve Bank of San Fransisco (for example). Then it is sent to the Federal Reserve Bank of Cleveland (for example). Then the check is sent to YOUR bank.

Each step of the way it will be stamped PEG.
PEG = Prior Endorsement Guaranteed.

Prior Endorsements Guaranteed means that each bank along the way has confidence that the check is good. So if you deposit the check in your account it means the bank believes the check is good.

The bank keeps the physical check, or they return it to you, or they destroy it. It's up to them. When they stamped it PEG, they guaranteed that it was good. It is up to them whether they retain evidence that it was good.

[Orion84]

When you deposit it at a bank, the bank will then scan the item to create a digital version of that check.

The digital version is then used in place of the physical check, in order to either receive those funds from the issuing back, or, if the check is from the same bank it's deposited at, as a record to transfer the funds from the original account.

The physical copy of the check will then be stored for whatever period of time the bank's retention policy is. Once it's been scanned, the physical copy is no longer needed, except as a reference, and/or in certain circumstances, such as if someone needs the original for whatever reason.

[jamesgoldman]

Shred it