Checks are money. You should handle your checkbook with as much care as the cash, credit card and debit card in your wallet. But checks are also more complicated than cash with rules governing how you write, manage and even stop them.
If you run afoul of these rules, your checks may be delayed, dishonored or paid incorrectly. Knowing the check-writing rules can save you time, emotional upset and, yes, money.
Writing a Check
Even if you know how to fill out a personal check step-by-step, you may not be aware of certain rules, including:
- Use ink. You must fill out paper checks with blue or black permanent ink. Pencils, odd-colored inks, and crayons are not acceptable and most likely will not be processed by the bank. Also, spelling and penmanship count – you don't want to confuse the bank about the recipient's name.
- Be careful writing a check to two people. When writing a check to two people, mind your "ands" and "ors," advises the Consumer Financial Protection Bureau. If you write the name of the person as "Bill or Mary Smith" as the payees, either one of them can endorse and cash your check. But "Bill and Mary Smith" requires both payees to endorse the back of the check before cashing or depositing.
- Include a decimal point. Put in those decimal points after the dollar amount of the check. If you simply enter $20, someone might add ".99" in numerical form and mess up your budgeting.
- Sign in cursive. Sign your checks in cursive so that the bank can verify your signature at the bottom righthand corner.
- Be careful writing a check to "Cash." Blank checks and checks written to "Cash" can be cashed by anyone. Guard that check as if it were cash, because it is.
- Start over if you make an error. Don't cross out the error if you fill out a check incorrectly. Tear up the check and rewrite it, as cross-outs can cause the financial institution to reject it.
Postdating a Check
You postdate a check by writing in a future date instead of the current date. The account holder usually does this to delay the payee from cashing or depositing the check. You can write a postdated check, but the bank need not honor your intention and can accept the check before the entered date. The check will bounce if your account balance has insufficient funds (unless you have overdraft protection).
State laws vary on attempts to defraud a payee by writing a check when you lack sufficient funds, and postdating might not hold up as a defense against intentionally bounced checks. Moreover, a prematurely cashed check that bounces will likely result in a penalty fee. Also, the bank may report the incident to a banking reporting agency such as ChexSystems, where it remains for five years and could cause other banks to refuse you a new account.
Stopping a Check Payment
You can ask your bank not to pay a check you've written, perhaps because it was lost or stolen. Banks can accommodate your stop-payment order until the payee cashes or deposits the check. The bank is liable for the payment amount if it cashes a check that you correctly stopped unless you didn't give enough notice in advance or didn't provide enough information (such as the check number or bank account number) for the bank to identify the check.
You can give a stop payment order orally but should follow it up in writing. Otherwise, the Cornell Law School says it will lapse in 14 days. Written stop orders remain in force for six months, and you can renew them for another six.
Your bank may charge you a fee for stopping a check. Consult your checking account agreement regarding how the bank handles stop-payment requests.
Handling Mistakes on Checks
If you receive a check containing an error, do not cross out the mistake and enter the correct data, as the bank will doubtlessly reject the check. Instead, contact the issuer and have them reissue a corrected check.
If you write a check that bounces despite your best efforts, immediately contact the payee and your bank. See if the bank will put the check back in for payment. Failing that, arrange payment to the payee as quickly as possible. You can expect to pay a penalty fee, so consider obtaining overdraft protection for your account.
Eric Bank is a senior business, finance and real estate writer, freelancing since 2002. He has written thousands of articles about business, finance, insurance, real estate, investing, annuities, taxes, credit repair, accounting and student loans. Eric writes articles, blogs and SEO-friendly website content for dozens of clients worldwide, including get.com, badcredit.org and valuepenguin.com. Eric holds two Master's Degrees -- in Business Administration and in Finance. His website is ericbank.com.