The Check Cashing Process
When you go to your bank to deposit or cash a check, a specific process takes place. The bank teller will verify you and your account information either via debit card or identification card. Those with positive banking history often can cash the check. In some cases, you may be required to deposit the check until it “clears.” You endorse the check, and the teller sweeps the check through a machine that creates an imprint of the transaction. The bank must wait for the funds to be sent from the other bank, which also verifies the funds and account number. If the account does not have money, the check will bounce, and you will be responsible for collecting the funds. Most bank policies place a hold on the majority of the check amount to give itself enough time to have the funds clear.
Not Getting the Money
The bank is not responsible for the money that cannot be collected in the process of clearing an account. Check with your bank’s terms and conditions, as the account owner may need to pay the bank a fee for depositing a check that could not be cashed. If you accept checks for business, get identification and valid contact information. Create policies that will charge the check writer a fee for bouncing a check. Still, you may not be able to protect yourself from fraud.
Bounced Checks
When you deposit a check, the bank sends it for collection. If it is unable to collect the money on a valid account, it will send it through a second time. This is usually done within a week of the first attempt. If the account still does not have the funds to clear the check value, the check will be returned to you and with the reason it was rejected. You will be assessed a fee for the inability to collect the money based on your account terms.
Fraudulent Checks
It has become common for con-artists to give someone a check on an account that either does not exist or is not their own. The con-artist gets their goods and services, leaving the person holding the check to foot the entire bill. A check that is deposited or cashed is endorsed by the party cashing or depositing it. By endorsing, you are telling the bank you are taking responsibility for the funds. If the funds are spent, and the bank cannot collect on the money, you will owe the bank the amount of the check plus any fees associated with the bounced check. If the bank suspects that the check is part of fraud, it will advise you to file a police report. If the criminal is caught, you may not be liable for the value and fees.
Check 21
The Check Clearing for the 21st Century Act (Check 21) was created to expedite the process of check clearing. Since most banks are on an electronic system and can access other institutions via the Internet instantly, this process can make validating funds in an account a few second process. As more banks update their systems to be a part of Check 21, the consumer response is two-fold. This can reduce hold times for check deposits, but it may increase the amount of fees consumers pay annually because many people send a check waiting for money to clear their own account. If the money isn’t there, fees will be assessed in a more timely fashion. This will help banks chase fraudulent activity faster by reacting faster.