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Metrobank will present your check to First National for payment through the check-clearing system. Actual practice in the United States is somewhat more complicated.

Most small banks do not process checks themselves. Instead, they send them either to a correspondent bank, with which they have an arrangement, or to the Fed, which also provides this service. The checks are sorted and those drawn on local banks are cleared through the local clearinghouse.

At each meeting of the clearing house, representatives of each bank present checks to the banks on which they are drawn and receive in exchange the checks drawn on their own banks.

During this process the banks keep track of how much they owe each other bank and how much they are owed by them. At the end of the meeting, the claims of banks on each  other are netted.  Banks with a net credit receive payment and those with a net debit make payment of the appropriate amount in “clearing-house funds” (a claim on the clearing house). These are settled in Fed funds (deposits at the Fed) on the following day.

The most familiar way to transfer ownership of deposits is by check. For example, suppose you have a deposit with First National, and you wish to pay Videomax $700 for a new TV. That is, you need to transfer ownership of 700 of your bank dollars to Videomax. You do this by writing Videomax a check for $700. Note that the check itself is not money: it is merely an order to pay money. It is an order from you to First National to transfer $700 of your deposit at the bank to Videomax.

If Videomax has a deposit at First National., it can present your check to the bank, and $700 dollars will be transferred from your deposit to Videomax’s. First National. will now owe you $700 less and Videomax $700 more. Payment has been completed. You have made payment in bank dollars of First National Bank and Videomax Has received payment in the same.

Suppose, though, that Videomax has its deposit at a different bank, Metrobank. Videomax will then have no use for the bank dollars of First National Bank. It will need to convert the $700 into bank dollars of Metrobank.

One way Videomax Can do this is to send a messenger to First National to present your check for immediate payment in cash. The cash can then be taken to Metrobank for deposit (conversion into Metrobank dollars). This method is quick and simple but inconvenient, and it is worthwhile only for large sums of money.

The more usual procedure is for Videomax to delegate collection of the check to its own bank. Videomax signs over the check (endorses it) to Metrobank, converting it into an order to pay Metrobank. Metrobank collects payment from First National and credits Videomax’s deposit with $700.

In this way, Videomax gets the Metrobank dollars it want. In exchange Metrobank gets $700 in First National dollars. If Metrobank finds it useful to maintain a deposit at First National, it may keep the $700 in this form. Or Metrobank may demand conversion of the First National dollars into definitive money