A check is a promise to pay from the issuer to the recipient – you’ll get the specified amount as soon as you present the check to the bank. But the promise is only good if the check-writer is honest. Accepting a bad check means you may not get the money you’re owed, and you may have to deal with bank fees and a bunch of wasted time. To protect yourself, follow a few simple steps to make sure your check is good.
What Is a Bad Check?
A bad check is a check your bank doesn't pay, either because the check is fake, or it is not filled out correctly, or because the check-writer does not have enough money in their account. Old checks are a problem, too, as most banks will not pay a check that’s over six months old. We’re talking here about personal checks – a cashier’s check is safer as it’s guaranteed by the issuing bank.
Whether it happens deliberately or accidentally, a bad check will cost you money. For starters, the check in your hand is not worth the paper it is written on. You will have to go back to the writer and ask them to pay you in cash, transfer the money to your bank account or write you another check. If you were relying on the money to pay your rent or other expenses, then you may find that your own account goes into overdraft.
To rub salt into the wound, you might also be hit with bank fees. It’s a peculiarity of check banking that both parties pay a bad-check penalty – the person who wrote the bad check and the recipient. The penalty will appear on your statement as a non-sufficient funds penalty, and it averages around $35.
If that sounds like a lot of headaches over one slip of paper, read on. There are a few precautions you can take to avoid a bad-check nightmare.
Does It Look Fake?
Fake-check scams are up 65 percent since 2015, according to the Federal Trade Commission. That translates to an eye-watering 500 million checks forged every single year. Perhaps surprisingly, scammers are hitting 20-somethings the hardest, with this age group more than twice as likely as people over 30 to be the victim of check fraud.
To combat fraud, banks weave sophisticated security features into checks to help you figure out what’s real and what’s a fake. A real check will be printed on heavy paper stock, contain watermarks, have at least one perforated edge, be printed using smudge-free ink and contain the words “original document” on the back. You may be dealing with a fake check if any of these features are absent.
Is it Filled Out Correctly?
Checks look slightly different from bank to bank but the basic information on them is the same. When someone hands you the check, look over it and make sure all the relevant information is filled out. Some information, such as the bank name and logo, will be printed on the check; the writer will fill out the other parts. The anatomy looks like this:
- Payer name and address
- Your name (or your business name)
- Bank name, logo, address, etc
- The amount being paid, in words
- The amount being paid, in numbers
- Written note about the payment (“Birthdays gift,” “Payment for flights”)
- Routing, account and check numbers at the bottom
- Payer signature
If anything’s missing, don’t accept the check. As an extra precaution, make sure the person signs in front of you. A pre-signed check could be a red flag that the check is fake or stolen.
Who Wrote the Check?
Unless you have a merchant account with a check verification service, then you will not be able to verify that the check writer has enough money in his account. However, you can limit the risk by making sure you know who’s writing the check. That’s easy if the check is written by a friend or family member. For customer checks, ask for photo ID and make sure the name and address match the details on the check.
It’s also a good idea to get the check writer’s contact information so you can get in touch with them if there’s a problem. Don’t forget to endorse the check yourself before you deposit it.
As a final piece of advice, Patriot Software suggests that you only accept checks from banks with local branches. That way, you can visit in person to verify the check is legitimate.
- SQN Banking Systems: 101 Facts About Check Fraud
- Patriot: 7 Precautions for Accepting Checks: Spotting Counterfeit Checks & Verifying Funds
- Federal Trade Commission: New FTC Data Spotlight: Fake Check Scams Cause Big Losses, Especially for Consumers in Their Twenties
- Bankrate: Essential Things to Know When Cashing Old Checks
- National Credit Union Administration. "Understanding a Check and Balancing a Checkbook." Accessed Apr. 27, 2020.
- Consumer Financial Protection Bureau. "I Received a Check Where the Words and the Numbers for the Amount Are Different. Is This Check Valid and for How Much?" Accessed Apr. 28, 2020.
- Consumer Financial Protection Bureau. "Can a Bank or Credit Union Cash a Post-Dated Check Before the Date on the Check?" Accessed Apr. 29, 2020.
- Consumer Financial Protection Bureau. "Can I Cash a Check at Any Bank or Credit Union?" Accessed Apr. 29, 2020.
- Determine whether a check is valid with the writer of the check present. That way, if the funds are not available, other methods of payment can be arranged.
Jayne Thompson earned an LLB in Law and Business Administration from the University of Birmingham and an LLM in International Law from the University of East London. She practiced in various “big law” firms before launching a career as a commercial writer specializing in finance and tech. Her work has appeared on numerous financial blogs including Wealth Soup and Synchrony. Find her at www.whiterosecopywriting.com.