When you receive a check, whether it be a paycheck or a check from someone you know, the chances are you head to the bank, deposit the check, get your money, and don’t think twice about it.
We know that checks aren’t as prevalent as they used to be. However, a survey last year from the Federal Reserve of Atlanta indicated that 46% of respondents had used a paper check in the previous 30 days. That tells us that despite the rise of online banking, the use of physical checks is alive and well.
That’s why the team at Cash Store wants to take a few minutes of your time to explain all the hidden workings involved with cashing a check. There’s more to it than you might have ever realized.
Let’s start with the basics. A check is a written, dated, and signed paper document that advises a bank to pay a specific amount of money to the bearer. The four key components of a check are as follows.
But with it so easy to simply transfer funds back and forth online, why do people still use paper checks? The reasons may surprise you.
Though your bank makes the process look easier, there is more to the check-cashing process than meets the eye. Here’s what is happening behind the scenes.
Endorsing a check means signing the back of the check to authorize the bank to process the payment. To properly endorse a check, sign your name on the designated line on the back. If additional information is required, such as account numbers or "For Deposit Only," be sure to include it.
You may present the check at a bank, credit union, or check-cashing service. Each option might have different requirements and fees. To verify your identity, you will need to show a government-issued ID, such as a driver's license or passport.
When you present a check, the bank verifies it by checking the issuer's account status, confirming sufficient funds, and verifying its legitimacy. Banks consider the account status, available funds in the issuer’s account, and any potential holds that might need to be placed on the check.
Unfortunately, some issues may arise with the use of checks. Part of this problem stems from poor money management due to the lack of a budgeting system. The lag time between cash being deposited at the bank and actually clearing may result in a false balance when looking at your funds online.
Here are some specifics on the issues that may arise.
A bounced check occurs when insufficient funds are in the issuer's account to cover the amount written. The bank cannot process the payment, and the check is returned unpaid.
Bouncing a check may lead to hefty fees for both the issuer and the recipient, negatively impacting your account. Repeated instances may harm your credit score and lead to account closure.
Recognizing a fraudulent check is a must. Warning signs include suspiciously large amounts, discrepancies in the check's information, or checks from unknown sources.
To protect yourself from check fraud, always verify the issuer’s information, secure personal information, and use checks from reputable sources. Report any suspicious activity to your bank immediately.
Bank policies regarding check processing, fees, and holds may vary significantly. Some banks may offer quicker processing times, while others may have more stringent verification processes.
To avoid surprises, familiarize yourself with your bank's specific rules. Review your bank’s policies online or speak directly with a representative to understand the details of fees, holds, and processing times.
If you’re in a financial pinch. Cash Store may be able to help. We offer loans between $500 and $3,000 and 90% approval rates. Short on cash? Consider our alternative to a payday loan and complete your prequalification application today.
The content on this page provides general consumer information or tips. It is not financial advice or guidance. Each person’s circumstances are unique. The Cash Store may update this information periodically. This information may also include links or references to third-party resources or content. We do not endorse the third-party or guarantee the accuracy of this third-party information. There may be other resources that also serve your needs.
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