Saturday, October 15, 2022

How Do Banks Verify Checks

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What To Watch For

Check Clearing (Explained) 2017

You may never know for certain if a check is good, but you can gather some good information to help you decide what to do with that check.

There are a few items you can look into:

  • Where/who did the check come from?
  • Does the checking account have funds available?
  • Does the check show signs of being a fake document?
  • Does the person who gave it to you make a habit of bouncing checks?
  • The Check Is Made To A Business Name

    Say a business owner wants to cash a check written to the business. For example, John Smith, owner of John Smith Landscaping Services LLC, wants to cash a payment from a customer.

    That may seem harmless enough, but it might not be cashable if the owner has not followed through with a few simpleand necessaryprocedures.

    John just finished a large job and receives a check made to John Smith Landscaping Services LLC. He tries to cash that check at a nearby bank, but the bank teller refuses to complete the transaction unless John can provide proof of valid business registration with the state.

    Business owners need to take two steps to prevent the problem:

    • Complete the registration of the business with the state government. The limited liability company is the most common type of state business registration. Others include corporations, nonprofit organizations, and partnerships.
    • Open a business account at the bank under the business name.

    Both these steps are needed for other purposes, notably for tax filing, but they’ll also save aggravation at the bank.

    If you don’t have an account at that bank, you may be charged a check-cashing fee, especially if you go to the payor’s bank.

    Practical Advice For Accepting Checks

    The Small Business Administration offers advice for businesses and individuals accepting checks:

    • Accept checks from local people and local banks.
    • Only accept checks for the amount of the purchase
    • Do not accept starter, unnumbered or other nonpersonalized checks
    • Require identification and make sure that the signature on the check matches the signature on the ID.
    • Make sure that the check is dated for the day it is written. Do not accept a postdated check


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    How To Spot A Fake Check

    Even if the account has funds available, its possible that youve been paid with a fake check. With todays technology, its easy to copy a real check and print a genuine-looking check. If you deposit a fake check, it will be returned due to fraud. But that can sometimes take weeks to discover, and if you’ve already spent the money then you’ll owe it back to the bank.

    Inspect every check you receive:

    • Make sure the check is issued by a legitimate bank and doesn’t have a fake bank name. If the check includes the bank’s number and address, then make sure it is correct.
    • Look for check security features, such as microprinting on the signature line, a security screen on the back of the check, and the words original document on the back of the check.
    • Review the amount of the check, because scammers often write them for more than the original amount that was intended.
    • Make sure there aren’t any smudges or discoloration, which can indicate that the check was altered.

    If you have any doubts, then dont accept the payment.

    Sophisticated con artists can always buy genuine check stock and use somebody elses account number.

    How Do I Know When My Money Will Be Available

    A Bank Check

    Your deposit receipt provides the detail of when the funds will be available to you, including funds that are immediately available, available the next business day, or funds subject to a deposit hold. You can also use our convenient online, and mobile tools to track your deposits and determine your available balance at any time.

    If a hold is placed on a deposit, you will be notified of the hold either by the teller, by mail, email, at the ATM, or through mobile deposit.

    Wells Fargo provides its funds availability schedule to all customers when they open an account. Also, you can request a copy of the schedule at any time in our banking locations.

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    What Is A Fake Check

    Fake checks can be difficult to identify. Because technology has advanced so much, people can produce fake checks and money orders that are difficult for consumers and even bank employees to identify as fraudulent.

    In most fake check scams, the person will ask you to deposit or cash a check. Once you deposit the check, theyll ask you to purchase gift cards or refund them a portion of the check amount.

    When the bank later finds out that the check is counterfeit, you not the scammer will likely be held responsible for returning the money to the bank.

    Scams are constantly evolving, but some of the most common ones will claim that

    How are these scams so effective? They can be very convincing. The fake checks may look like legitimate checks with appropriate watermarks, and they may appear to be issued by legitimate financial institutions. In some cases, they can be checks written from the accounts of identity theft victims who have no idea someone is writing checks in their name and withdrawing their money.

    Disadvantages Of Cashiers Checks

    • Theyre not foolproof. Cashiers checks are more secure than other types of check payments, but they can still be targets for fraud. Scammers can create seemingly authentic-looking cashiers checks to pay you with that are only revealed as fake when you try to deposit them at your bank.
    • Cashiers checks tend to have a fee attached. While some banks may offer cashiers checks for free, that benefit may only be available if you have a premium checking account. More often, youll pay a fee of around $5 to $15 for a cashiers check.
    • You usually have to visit your bank branch. While you can quickly write a personal check from your checkbook at home, youll typically need to go to the bank to get a cashiers check if your financial institution doesnt allow you to order them online. This could be difficult to do if you need to make a payment outside of regular banking hours. For example, attempting to buy a car on a Saturday might require waiting until Monday if your bank doesnt have weekend or evening hours.

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    Remember Holds Protect You

    Although it can be frustrating to not have immediate access to your money, it is important to realize that the hold is protecting you, as well. If the check does come back and you have already spent all of the money, then you will have to pay it back. This can overdraw your account and cause other payments to bounce.

    If the check is for a large amount it can be difficult to come up with the money quickly, or you could even end up damaging your credit as a result of a returned check. That’s why it’s wise to ensure the funds have cleared your account before you begin spending them.

    How Long Are Checks Generally Good For

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    The Uniform Commercial Code is a collection of laws and regulations meant to harmonize the laws of sales and regulations across the U.S. The UCC tells banks that they are under no obligation to accept personal or business checks that are older than 180 days . So, generally speaking, personal and business checks are good for 6 months however, some banks will accept older checks.

    If you found an old check made out to you, you should check with your bank and verify their policy. If you wrote a check that hasnt been cashed, you may consider putting a stop payment on the old check. After that, you should contact the recipient of the check to see if they want a fresh check to replace the old one.

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    How Do I Check The Status Of My Bank Verification

    To check your status, visit Account & Settings> Bank Accounts in your online Square Dashboard. Youll also receive an email from Square when your account is verified.

    With no additional action needed on your part. Your transfers for funds received from payments taken will be sent to your bank account following your transfer schedule.

    Top Reasons Banks Won’t Cash Your Check

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    We may be moving toward a cashless society, but we’re not there yet. Despite the growth of electronic payments, debit cards, and , checks are still widely used in the United States. More than 3.767 billion paper checks were issued in 2020 alone, with a combined value of $7.875 trillion, according to a Federal Reserve report.

    While writing a check is quite simple, cashing one can be a chore. if you’re heading into a bank or credit union with your check, it’s important to be prepared. To avoid any problems, review these top reasons a bank may not cash your check.

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    Reasons To Endorse A Check

    The reason check endorsements exist is to protect the money of the payer and ensure the intended recipient collects it.

    You can think of it like signing for parcels and packages that you receive, except in this case, its money youre collecting.

    The moment you sign the back of the check, you give your bank the green light to collect and process the payment.

    Why Checks Trigger Deposit Holds

    Good News For Banks, Bad News for Lawyers

    A check appears uncollectible when:

  • The paying bank communicates that a stop-payment order was placed on the check, there are insufficient funds in the drawer’s account to cover the check, or the check will be returned unpaid.
  • It has a stale date, meaning the check was deposited six months after writing.
  • It’s postdated with a date in the future.
  • Your bank believes you may be engaged in check kitingpurposefully writing checks with insufficient fundsor are insolvent or nearly insolvent.
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    Send And Receive Money The Easy Way With Wise

    Sending and receiving checks can be a headache and one thats easy to avoid.

    Wise allows users to easily and securely send money online or through the Wise app, often in a matter of seconds.

    Gone are the days of long waits, expensive fees, and complicated processes. If you want to send and receive money without the usual frustrations associated with checks, give Wise a go.

    Wait A Few Days Before Contacting Your Bank

    Try waiting a day or two before you call your bank.

    Keep in mind business days are Monday through Friday, and non-business days are on the weekend.

    Holidays can also slow down the hold time on your check because they are not considered business days.

    It will usually take a day or two for your check to clear.

    But if it doesn’t clear in that time, it’s most likely due to an issue with the paying institution , your account history, account balance, or check amount.

    You know your banking history better than anyone else.

    If you’ve consistently bounced checks or overdrawn your account, you will have an idea of why that check for $5,000 isn’t clearing within the average amount of time.

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    Cashing A Treasury Check For A New Customer

  • For a new customer, you need to get as much information as possible, including name, address, home phone, cell phone, social security number, employer, references height, eye color, race, etc.
  • At least one form of government-issued photo ID is required.
  • You may wish to have the customer fill out a written application, or you can enter the information into Powercheck directly.
  • Be sure that the photo image in the new customer card in Powercheck is clear Scan a copy of the customers ID into Powercheck.
  • For Treasury checks for new customers, you MUST run the customer on the LexisNexis Instant ID program, including social security number. Be sure to print out the Instant ID report for the customer file.
  • The customer must use the ink pad provided to put place a print of the right index finger on the front of the check.
  • Obtain an approval code from your supervisor if check amount exceeds your limit.
  • What Background Checks Do Banks Use

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    Banks and financial institutions owe it to their customers, members, stockholders, and insurers to vet their employees thoroughly. Most bank jobs involve access to both money and sensitive personal information. These factors make working at a bank attractive for someone who might be looking to steal money, commit identity theft, or both. Because of these threats, banks tend to be very vigilant in conducting background checks on all new hires.

    When it comes to discussing the types of background checks that banks use, the first considerations should be the FDIC and Section 19.

    The FDIC, or Federal Deposit Insurance Corporation, is the organization that insures most banks in the United States. Section 19 is a measure of the Federal Deposit Insurance Act that limits who the FDIC can hire. Section 19 bars FDIC banks from hiring any person who has been convicted of any criminal offense involving dishonesty, breach of trust, or money laundering. Candidates or employees who have entered into a pretrial diversion or similar program in connection with such an offense must also be disqualified or terminated.

    Bank background checks will typically go beyond criminal history. Verification checks are common to make sure that candidates are being honest on their resumes about education, professional credentials, and past employment. Some banks also use to learn more about their candidates financial habitsthough credit checks for jobs are not legal in all parts of the country.

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    Why Verify A Check

    When you present a check to your bank, and it doesn’t clear, not only do you not receive the funds you’re owed, but you might be charged a fee for the declined check. In most cases, if the check writer made a simple mistake, they will pay this fee. You can redeposit the check when the person tells you they now have sufficient funds in the account.

    Another reason to verify a check is fraud. With so many methods for paying electronically, you might wonder why someone is using a paper check, especially if they tell you they won’t make an electronic payment. To avoid looking accusatory, you might set a policy that your business verifies all paper checks before releasing your product.

    If you’ve had a check for more than a few weeks, you might want to make sure it’s still good. The person who wrote it might have forgotten about it and not maintained adequate funds in the account.

    How Long Deposit Holds Last

    Banks are allowed to be as generous as they want when making funds available. They can let you walk away with cash immediately when you make a deposit, but they almost always place a hold on deposits that can last for several business days. Remember that business days are Monday through Friday, excluding holidays, so five business days means seven calendar daysor more, if theres a federal or state holiday in the coming week.

    Federal law under the Expedited Funds Availability Act and the Check Clearing for the 21st Century Act, limits how long banks can hold your deposits. And now that banks digitally send images of checks rather than mail the original paper checks, the process has gotten quicker.

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    How Can I Protect Myself From Fake Check Scams

    Here are some things you can do to help protect yourself from check fraud.

    • Verify the check with the bank. If you receive a check, contact the bank that issued the check to verify its legitimacy. Dont call the number listed on the check counterfeit checks often have fake numbers. Instead, look up the banks customer service number on its website.
    • Check the amount. If someone owes you money and writes you a check, review the check amount. If its for more than what youre owed, thats a red flag.
    • Dont send money. Theres no reason someone would write you a check and then ask you to pay fees. If youre asked to send money after receiving a check, youre likely dealing with a scammer.
    • Wait until the check is verified. While it may take weeks before the check is verified, its a good practice to wait to spend the funds until the bank has reviewed the check. It pays to be careful, especially if youre getting a check from strangers.

    When Do Money Orders Expire


    The expiration of money orders depends on the laws of the state and the rules of the issuer. Generally speaking, money orders dont expire, but they could become so old that they fall under abandoned property regulations or the value is eaten with fees.

    Its important to read the fine print as provided by the issuer. After 1-3 years, Western Union will charge a fee against the value of the money order. If this goes on long enough, the money order will be worthless. U.S.P.S. money orders do not expire and retain their value indefinitely. As long as there are post offices, you can cash a U.S.P.S. money order.

    Please note that its always possible that Western Union or U.S.P.S. have changed their rules. Contact the issuer of your money order to find out if they have an expiration date or charge fees against old money orders.

    Money orders are a substitute for checks and generally used for lower value transactions. If youre trying to figure out if a cashiers check or a money order would better suit your needs, read our article Cashiers Check vs Money Order.

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