6 Things You Didn’t Know About Checks

Checks may seem like an item of the past for many as the debit card is a commonly accepted alternative. However, businesses and some select lenders still require the commitment of a traditional check to pay for their services. Before you go off writing random checks, here are six things you probably didn’t know about them.

A Bad Check Can Cost You

A bad check is simply writing a check for more money than you have in your checking account. You can do this intentionally or unintentionally. Either way, you’re going to be hit with a plethora of fees. When a bad check is cashed by a business, your bank will refuse to fund the check amount as you don’t have the money for it. In this scenario, your bank will hit you with a bad check fee for around $35. Then, the business you wrote the check to will charge a fee, typically around $25. This is $55 worth of fees for writing a bad check.

Checks Have Built-In Safety Measures

A quick look at the back of a check will reveal multiple safety seals for the check. Many financial institutions will utilize security measures to protect their patrons. Some of these include watermarks and specially treated paper. While your regular checks will come with some basic safety features, you can always opt for more. Tokenization is a new safety feature that can help to conceal your sensitive data to provide even more security for your account.

Floating Is A Thing

Traditionally, it would take days from the time someone deposited a check until the money was actually deducted from the writer’s account. This waiting time was referred to as the float. It’s formally defined as the time it takes from the check to pass through the merchant until the bank debits the funds. Floating a check was a practice of some individuals who would write a check when they didn’t have the funds to cover a purchase with the intent of knowing their paycheck would be deposited to their account before the check cleared. This floating period has been drastically reduced, making floating a very uncommon practice.

Every Check Goes To A Regional Processor

Most people know that when they write a check, the person who received it will get the money in their own checking account or in cash. However, most people don’t realize what’s behind the entire process. Traditionally, the check you write is deposited by the recipient at their local bank. The check then gets mailed to the bank’s regional processing center. Then, the regional processing center sends the check back to your bank for processing. This whole process used to take days to complete. With the help of digital technology, this process can be completed much quicker.

Bounced Checks Are Reported To Chex Systems

One thing that not many checking account owners realize is that there is a company that keeps records of your negative checking account activity. This company is called Chex Systems and they provide a database of customers who write bounced checks and fail to repay them. So, if you find yourself bouncing checks and just heading to another bank to open an account, it’s not going to work too well for you. Every bank runs new potential customers through the Chex System before they authorize their new account. If you have a negative record, the new bank will likely deny you from getting an account with them.

You Get A Hefty Fee When They Bounce

Just because you write out a check doesn’t mean you have the money in your account to cover it. Depending on the bank that you use, they may provide you with credit for the amount that is not covered by your account. For example, if you write a check for $250 when you only have $200 in your account, they may front the $50 for the transaction. However, you’ll be slapped with not only having to pay back the credit they lent to you but a nice hefty fee for bouncing a check.

Checks may seem like a relic of the past for many. However, sometimes you’ll find yourself having to utilize them to conduct business. Understanding the facts above can go a long way in ensuring that your check writing goes smoothly

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About the author: Wifred Murray

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