A transit check is one in which the payer and payee have accounts at different banks. According to the Office of the Comptroller of the Currency, U.S. banks and credit unions are not obliged to treat transit checks as cash without first clearing them – i.e., ensuring that enough money is in the payer’s account so that the check won’t bounce. But sometimes, a bank may treat small transit checks as cash as a courtesy to customers in good standing.
Depositing a Transit Check
In standard processing, your bank puts a hold on a deposited transit check for one or two days to verify that the check will clear (i.e., won’t bounce). You can’t withdraw funds from a held check until it clears.
For example, suppose Sue, who banks at Bank A, writes a $50 check to Bob, who has a checking account at Bank B. Bob can deposit Sue’s check, a transit check, at Bank B in several ways: with a teller at a bank branch, by mail, by ATM or by scanning it into a mobile banking app. Until the check clears, Bob can’t access the $50.
Depositing a Transit Check as Cash
Depositing a check for cash is different from cashing a check, as the latter doesn’t involve a deposit. There are two reasons why you may want to deposit a transit check as cash:
- You want to split the check between a deposit and cash back, or
- You want to withdraw the funds without waiting for the check to clear.
Typically, bank tellers aren’t authorized to deposit transit checks as cash. However, you might be able to convince a bank supervisor to do so if the check is small (say, less than $200) or government-issued. Your chances of success may hinge on your relationship with the bank. It will help if you are a long-time customer with several account types and have overdraft protection on your checking account.
Still, you have no assurance that the bank will agree to deposit the check as cash. If the bank lets you split the deposit and the check subsequently bounces, the bank will charge you for the check amount and probably tack on a nasty fee, or it could even freeze or close your account. If the bank thinks you were trying to defraud it, it may report the incident to ChexSystems, whereby blemishing your record for five years and making it harder to open new bank accounts.
If the bank won’t deposit your transit check as cash, you may want to try cashing the check in full and then deposit some of the money. Either way, the bank may charge you a fee for the service.
Cashing a Transit Check
Just as U.S. banks don’t have to deposit transit checks as cash, they don’t have to cash transit checks. Once again, your bank may extend the courtesy to good customers who want to cash small (or government) checks and can produce a valid picture ID. If you don’t have an account at the bank, you’re chances of having your check cashed by a bank other than the payer’s are minimal, even if it is a government check.
Endorsing the Check
You must first endorse a check before either depositing it or cashing it. This requires you to sign the back of the check and write down your account number. You may also have to fill out a deposit slip with the bank’s name and routing number preprinted, suggests HSBC. You then write in your account number (if not preprinted on the slip), the date and the check amount.
If you are cashing the check in full or splitting the deposit, make sure you count the money you receive. For all transactions, verify that the accompanying receipt is correct.
- If your bank is unwilling to cash a transit check because of the length of your relationship or your average balances, you can cash the check at the drawee bank.
- When you cash a transit check against your account, you are effectively taking out a loan against the uncollected funds contained in the check. Your bank sends the check for collection, and it often takes a few weeks for the drawee bank to transfer funds to your bank. If the check bounces, your bank must reclaim the money you received by debiting your account. Additionally, most banks charge a return deposited item fee for any returned checks.
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.