An emerging trend in the banking industry is to digitize the check storage, processing, and transmission process. One bottleneck in this process is the extremely large sizes of digitized checks. A check image is usually comprised of a foreground overlaid on top of a background. For most banking functions, only the foreground carries useful information and should be specified accurately. The background either does not need to be retained, or can be represented with less precisions, depending on the underlying banking requirements and procedures. Recognizing this special characteristic of check images, we propose a layered coding approach. The first layer consists of the binary foreground map. The second layer contains the gray or color values of the foreground pixels. The third layer retains a coarse representation of the background. The fourth layer comprises the error image between the original and the decompressed one from the first three layers. The methods for segmenting the foreground and for coding different layers are presented. The proposed layered coding scheme can yield a more accurate representation of a check image, especially the foreground, than the JPEG baseline algorithm under the same compression ratio. Furthermore, it facilitates progressive retrieval or transmission of check images in compressed formats.