The check your aunt wrote and sent to you is really a set of instructions telling your bank how to collect money from her bank. You see, since your bank gave you cash in exchange for that simple piece of paper, they must now collect the amount of the check from your aunt's bank in Arizona. Actually, that check is a bit more than just a simple piece of paper. By signing the check, your aunt has given her bank permission to take money from her account to pay another bank. In your case, Logan, the other bank is the bank where you cashed your birthday check.

Let me explain how this works. The checks that are deposited, or cashed at a bank, are bundled at the end of each business day and sent to a check processing center where thousands, maybe even millions of checks are processed every single day. Each check has some numbers printed on the bottom. These numbers identify the bank and account number where the person who wrote the check has her account. Checks are sorted based on these numbers and are then exchanged between banks. Each bank pays the other banks to get their checks back.

Now, how does your aunt's account get charged for the check she wrote to you? Well, since her bank was charged for the check she wrote, they now withdraw the money from your aunt's account to cover the check.

I know this is a little bit confusing, so if you'd like to learn more about how checks and checking accounts work, you can find more information in the Classroom under Checking Accounts.

I hope you remembered to put some of the money you received from your aunt in your savings account! Oh, and Happy Birthday Logan!

Did You Know?

Although the number of checks being written each year is declining slightly, in 2000 approximately 42 billion checks were written by consumers and businesses in the United States.