Checks offer a convenient and safe way to make payments. Checks are certified paper forms used by people in transferring money from one location to another. It is a written order instructing a bank to pay a given amount of money from a specific checking account to a particular entity, for instance, a supplier.
Writing checks and waiting for the payment to be processed can be time-consuming. The introduction of debit and credit cards led to the reduction of check payments by over 50% between 2003 and 2012.
In this post, we shall look at the critical things you need to know about checks. Read on and learn more about when to use checks, how to use them and what happens when a check bounces.
1. When to Use Checks
It is understandable if you’ve not used checks before. Checks are among the things you don’t need to know how to use checks until when the need comes. For instance, your landlord may require you to pay your rent using a check, or it may be a convenient way to donate to a charity.
As a vendor, you are required to pay the transaction fees while processing debit and credit cards. You can avoid these transactions by accepting only cash or checks.
2. How Checks Works
Checks are connected to your checking account with a brokerage, credit, or bank union. Checks are promises to the recipient that money will be available in your account when the check is deposited into their account.
Once a check is written, it is eligible for a few days up to 6 months. After that, banks are not allowed to transfer that money.
Usually, it takes 1 or 2 days for a deposited check to be cleared. It implies that money will not be available in your account but transferred to the account of your recipient. If the deposited check is over $5000, the bank might hold it for an extended period of time.
3. What is a Stale Check?
While writing a check, it is easy to make costly mistakes. What happens when you send a check with the wrong date on the date section? The bank will deny the transfer of funds because the check is stale.
Other instances that can make a check stale is when the amount to be transferred is not clear. For example, if you write the amount as one-hundred and twenty, the bank may interpret it as $100.20 instead of one hundred and twenty dollars.
It is crucial you take your time when writing a check and proofread it carefully.
4. Keeping Track of Your Account
You need to balance your checkbook to keep track of your deposits and withdrawals. By doing this, you’ll know the amount of money you’ve credited to your recipients and the amount of money remaining in your account.
Assume you have a $500 balance on Friday, and then write a $200 check for groceries on Monday. By keeping track of your check ledger, you will know that writing a $400 rent check later will not go through unless you deposit $100 more.
Balancing your checkbook may be unnecessary if you write a couple of checks in a year. But to avoid overdraft trouble, it is important to balance your checkbook.
You must track uncashed checks, scheduled banking transfers, and upcoming automatic bill payments.
5. Can You Order Checks Online?
Unlike the past when we could only get checks from banks, today we can order them from somewhere else. If you want to get checks delivered fast, you might want to consider ordering them online. Ordering checks online is not just fast, but also secure and convenient.
6. What Happens if You Bounce a Check?
If you don’t have the promised funds in your account, you’ll be charged some fees. imagine you’ve written a grocery check of $200, but you have $150 in your account, and the seller redeems it. You may be required to pay one of the fees below depending on the checking account and bank policy:
Overdraft Fee- the bank will allow the check to clear, but your checking account will have a debt. Depending on your bank, you might be charged between $25 and $40 for each overdraft.
Nonsufficient funds fee- the bank will reject the transaction and you’ll be charged a fee. Your seller will not be credited and might be charged a fee for presenting a bad check.