About Paper Checks

The reality is that the paper check is becoming obsolete as a method of payment. In the 1980’s and 1990’s, every adult had a paper checkbook and kept their records in it. With the advent of electronic payment, check fraud, and cloud-based recordkeeping, fewer and fewer people are opting to keep their records on paper, and fewer and fewer merchants are accepting checks as a method of payment.

What hasn’t changed is that the paper check is still the safest way to send money by snail mail. While the need to do this has decreased significantly, it isn’t zero. Some medical offices and no few government offices still require payment by snail mail, or if they do accept online payment, they charge extra for the service. (I’m looking at you, water and sewer bill.) It’s illegal and unwise to send cash in snail mail, and putting your credit card number on a slip in the mail exposes it to a number of people along the way who don’t need to see it. When you mail it as a check, only the entity written on the TO: line can cash that check, so it reduces the risk of money being withdrawn by someone who doesn’t have the right to do so.

There are also some people, especially older folks, who still use checks. A year or two ago, I was in a grocery store checkout line. The elderly man in front of me had been sent by his wife to the store to get a few things, and she had sent a blank check with him. I have the impression that she’d done all the money management for him, because he didn’t know how to make it out, and neither did the teenage clerk. I stepped in and showed them both how to fill it out, and he went on his way. The clerk told me afterward that she’d never seen one before.

So What Is A Check?

A check is an order to the bank to withdraw an amount of money from the account noted on the check and pay it to the entity in the TO: Line. The video below is a bit dated, but it explains the laws around checks, how they are processed, and how they are used.

Cautions About Using Checks

The video above shows checks being presented in paper to the bank. That isn’t done anymore; checks are now typically presented to the bank electronically as e-checks, which means that instead of clearing in a week, they’ll clear at best immediately or at worst in 2-3 days, unless you’re my water provider because they are archaic and need to be dragged kicking and screaming into the 21st century. What this means to you: if you present a check to someone for payment, you’d better have the money in your account now, not on Friday when you get paid, because it’s presented immediately, and “floating a check” (writing a check now expecting that money will be in your account before it is presented to the bank) doesn’t work like it used to.

Nobody else can sign a check for you. Your bank has your signature on file and will compare the signature on the check image to yours before honoring the check. Any attempt to duplicate someone else’s signature is forgery, and forgery on a check is check fraud. The person who duplicated your signature, and possibly you, can go to jail for that. Protect your signature.

A blank check — that is, a check that has your signature on it, but no amount or pay to: entity written on it, is effectively cash. Treat it as such, and don’t give one to someone you wouldn’t trust with all the cash in your bank account.

If you have a checkbook, as shown in the video above, it should be kept protected. Lock it in a drawer or safe when not using it.

If you write a check, record it immediately in the recordkeeping system of your choice. Paper registers come with the checkbook, but an online recordkeeping system works too. Record the check number, the amount, and the payee; your bank will tell you when they have honored that check, because it will show up in your account. If you record it at once, you won’t forget you wrote it and spend that money elsewhere. Check bouncing is illegal, and it’s UGLY.

Bouncing Checks (Or, Why Good Records Are So Important)

Pay attention to your bank’s policy on how they record withdrawals and deposits. This can be found in the paperwork that came with your checking account, or if you don’t have that, ask any bank teller and they’ll tell you. Many banks record checks before they record deposits, if the two happen in the same daily processing cycle, and quite a few will record the largest check first. Both of these are dangerous, and I’ll take an example to illustrate what can happen.

Say you’ve got $100 in your checking account, and you make an ATM withdrawal out of network for $40. You’ve also written a check for $57, and made an electronic payment for $72. Your bank makes the largest withdrawal first, but an ATM cash withdrawal comes out before any other type of payment (normally the case because it’s cash on the spot). So, both electronic payments land on the same day. The largest one clears first, so the $72 is pulled — but whoops, you only have $60 left so that puts your account in the negative. You’ll pay a bounce fee for that to the tune of $25-$35 per transaction bounced. So when the $57 – that would have cleared if it had been presented first – is presented, it too bounces. So, you’re paying $50-$70 to your bank, and both transactions bounce, putting you in trouble with both entities you paid. Not very nice, is it?

Don’t put yourself in that situation. Keep good records of every transaction, and make sure you can cover every transaction you authorize against that account.

A Final Word

It may be that you’ll never need any of what I just told you — or you might. Chances are you’ll come across a check at some point, even as they fade into obsolescence. If it does, remember this information, and you should be okay.