The use of paper checks dropped 7.2% per year from 2015 to 2018, according to Federal Reserve estimates. Still, you will likely have to use a check at some point in your life. Checks are often used for bigger transactions like renting an apartment or buying a car.
"We will eliminate the paper check eventually, but 'eventually' will be a long time down the road," Steve Kenneally, senior vice president of payments at the American Bankers Association, told Grow in 2019.
Because checks are used for important purchases, you want to make sure you fill them out correctly and know how they work. Here's a step-by-step guide to making and receiving payments via check.
When you think about checks, you might automatically associate it with a personal check someone scribbled on and put in a birthday card, but there are actually multiple kinds of checks.
"Different checks are used as the dollar amount increases and the level of trust between two people is less certain," Kenneally explained. "If you are buying a car from someone you've never met, chances are they won't take a personal check from you."
- Cashier's, bank's, or official check: This type of check requires a teller to withdraw funds from your personal account and cut a check from the bank to pay the receiver on your behalf. In this case, the bank is guaranteeing funds. Some banks charge a fee for this kind of check.
- Certified check: Certified checks are a type of personal check with an added security measure. They will typically have the word "certified" stamped on the front. This means the bank has verified that you have enough money in your account to cover it — and may place a hold on those funds until the check clears.
- Electronic check: An electronic check, or e-check, is a digital version of a paper personal check issued through your bank.
- Money order: A money order is a payment for a specific amount that the payer, or the purchaser, is required to pay upfront in cash or credit. Money orders, which are paper forms like traditional checks, are considered safer than checks because they're prepaid, so they offer a safeguard against the payment bouncing.
It's important to know how to fill out a check because even minor mistakes like misspellings, illegible handwriting, or missing fields can mean the bank will reject the check, which will cost you time and money.
Video by Jason Armesto
Follow these steps to ensure your check is accurate and cashable:
1. Fill in the date.
2. Clearly write the recipient's name on the line stating "Pay to the order of."
3. Use the outlined box to state, in digits, the amount you wish to pay. Start by filling in the box near the dollar sign to prevent anyone from adding in extra numbers.
4. On the line below the recipient's name, write out the value of the check in words. To indicate an amount without cents, for example, $500, you can write: "Five hundred dollars and 0/100 or xx/100." If it's not a round dollar figure, say $500.30, write it as "Five hundred dollars and 30/100."
5. Sign the check on the bottom right side.
6. Include a memo. This can help you and your recipient keep track of what the check is for.
Checks typically take two to three business days to clear. The exact time will depend on the bank, the amount, and when the recipient deposits it. Checks can take longer to clear if you're a new account holder or the check is international.
The good news is, most banks will likely make a portion of your check available to you before your check clears in full, possibly the next business day.
You have a few options for how you can deposit a check. Most banks will give you the option of doing this in person or online. Other options include depositing at a credit union, ATM machine, or by mail.
To make sure your check is processed correctly, check that every field is filled out properly and sign the back of the check. A check can't be deposited into a bank account if the back has not been signed by the check holder.
Generally, a check is good for up to six months; after that amount of time, banks are not obligated to cash it. So it's best to deposit a check as soon as possible to lessen the chance of your losing or forgetting about it. This way, you avoid a potential delay and can access your money more quickly.
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