In 2020, 6.51% of non-cash payments were made by check. Checks were used for 6.51% (or a total of 66,560) of all non-cash payment in 2020. So, there are still many people who insist on .
Accepting checks as payment can be a great benefit for some businesses. Some businesses refuse to accept credit or debit cards due to processing fees. Some small businesses aren’t even set up as merchants. 2
These businesses face a challenge: how to prevent bad checks. It is difficult to know if a customer has money in his checking account. Also, it can be costly and time-consuming if checks bounce. By having a strict policy on accepting checks from customers, you can lower the chances of receiving a bad check and paying for it later.
Check your ID
Verify the identification of the person writing the check. This will ensure that you are dealing with the owner of the account. You can ask to see a person’s driving license, for example. Check (and copy) the address of the ID and compare it to the address written on the check. You can also write the ID on the check, but do not let the customer write it on beforehand, since they might provide a false number.
It doesn’t necessarily mean that the checks are bad, but if you combine this with other red-flags, there could be a problem. Avoid accepting checks with temporary addresses such as hotels or post offices.
Watch the Signature
You should insist that checks be signed in person at your business. Never accept checks pre-signed. It is important to see the signer because a thief could steal a check that has been signed, alter it and then bring it into your office. 3
Ask the customer to write their name on the check if the signature is not legible. Comparing the signature with the one on the ID you have obtained will help you confirm that you are dealing with the right person.
Find Contact Information
Check that the contact information of the customer is on the check. 4If it’s missing or not current, ask for the address and phone number. In the event that something goes wrong, it is important to notify the customer as soon as possible.
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A Closer Look
Check the check for any security features, such as watermarks or microprinted words that are so small they can’t be seen by the naked eye. Look for neatly-cut edges and security features such as microprinted words or watermarks that are too small to be seen by the naked eye.
You can avoid a bad check by rejecting payments that have been tampered with. You can avoid a bad check by refusing to accept payments that are tampered.
Verify the check number
If the check is for a brand new account, proceed with caution. Check numbers can be used to determine an account’s relative age. It’s important to note that anyone can request a higher check number. So don’t automatically assume that a check with a 9900 number is from an experienced account. Don’t accept checks that have no number, or are handwritten. 3
Note:
Checks with a number lower than 125 are more likely to be bad checks.
Validate the Amount
Check the amount on the “Pay To Order Of” line to ensure it matches the figure entered in the box for the numeric value. For example, the check “Fifteen Hundred and fifty/100 Dollars” should have $1500.50 included in the box.
The bank will only honor the amount written on the pay to line if there is a discrepancy between the amount entered in the box for the numeric value and the amount that appears on the pay to line.
Requires the current date
Refuse to accept a check that has a future date, also known as a post-dated check. Refuse to accept a check that has a future date, otherwise known as a “post-dated” check.
If you’re dealing with a fraudster, the delay in funds arriving due to a post-dated cheque may allow the criminal to leave before you realize that the check bounced.
Keep it Local
Try to only accept checks from customers that live in the state where your business is located, or who have an account with a local bank.
People move and some of your customers may be on vacation, but there are more risks with checks from out-of-state. You can’t contact the bank to verify the check if you need to. It may take you time to research whether or not the bank is located in another state.
Verify Funds
If you are unsure, you can ask the bank of the check writer to check the funds on the customer’s account before accepting the payment. This is especially useful for large amounts as you will avoid having a bad check bounce and causing you to lose out on an important payment. It’s possible that the bank will refuse to verify the funds. There’s also no guarantee the funds are there if they do.
Sign up for a third party check-verification service that will help you flag suspicious checks. These services perform a variety of tasks in order to reduce the risks of accepting checks as payment. They also determine whether a checking accounts is valid and has positive balance.
Do Not Spend it Right Away
The check clearing process can be confusing because your bank may allow you to withdraw or spend some (or all) of the funds from a checked, usually within two days. However, it could take weeks for it to become clear that a “bad” check. Check clearing can be confusing. Your bank might allow you to spend or withdraw some of the funds in a check within a couple days. However, it may take several weeks before it becomes clear that a particular check is “bad”. “1011
You’ll need to pay back the bank if the check bounces once you’ve used the money. If you are unsure, wait at least 30 days or even longer before using the money from the recently deposited check. You can check your bank’s policies for accepting checks, or call them to learn when the money will arrive.
