Everything you need to know about the bank check

Everything you need to know about bank checks

A bank check is a pre-printed sheet of paper that has a specific standard layout. Checks are used as payment instead of cash and can be issued/drawn for any amount desired by the issuer of the check.

They are a banking instrument in decline but still used in some countries around the world. It is used in many countries in Europe and even in Africa where financial inclusion is still weak. But, it is surprising to see that most people, even economic operators have only a very basic knowledge of checks.

Therefore, I thought of writing this guide which describes the basic principles of bank checks, how they work in order to allow you at the appropriate time to use it in place of another method of payment. I tell you EVERYTHING. But before you start, here is a premium training that will allows you to know all the secrets to succeed in the Podcast.

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???? What is a bank check?

A check is a payment agreement between two people or organizations. When you write a check, you are agreeing to pay another person or organization the money you owe them and you are asking your bank to make that payment.

Cashier's checks may be the preferred way to pay in certain financial situations when you need to make a large payment or are concerned about payment security.

This type of payment is guaranteed by the bank, which can offer assurance to the recipients that the check will not be returned for insufficient funds. Before talking to you about bank checks, I would first like to present the types of checks that exist.

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????The different types of checks

There are different types of checks beyond the type of paper that collects dust in your desk drawers. You may not encounter them often, but knowing them can help protect you when making a purchase.

Here's what you need to know about cinq types of checks beyond personal checks and when you might meet them.

#1 Bank checks, bank checks or official checks

This type of check is less risky to use than a personal check. When you use a personal check, the money comes directly from your account, so if it turns out you don't have enough funds to cover what you owe, the recipient might be out of luck. A cashier's check, on the other hand, will not bounce.

Typically a cashier's check is also not free. Fees may vary depending on the bank you use, the type of account you have, and the size of the check. It is this type of check that interests us in this article.

#2. Certified checks

A certified check is a type of personal check that the bank guarantees. When you write the check, the bank checks that you have enough money in your checking account to cover it. She can hold those funds until the check clears.

The check usually has "certified" stamped or printed on it. Fees vary depending on the bank you use and the size of the check.

#3. Postal money orders

Money orders are prepaid paper certificates that work like a check. The indicated recipient can deposit or cash them.

A big advantage of postal orders is that you can buy them in many different places, including post offices. This convenience makes it a good option for people who don't use bank accounts or don't have access to a nearby branch of their favorite bank.

#4. electronic checks

An electronic check is a digital version of the paper personal check issued by your bank. You can often set up automatic payments using electronic checks so you don't have to remember to write paper checks for recurring bills like your rent or mortgage.

#5. The giant checks

Although they look good in pictures, those giant checks you see lottery and contest winners holding are just props. They can't cash them. Lottery winners usually receive their real money by bank transfer.

????Differences between bank checks and personal checks

A personal check allows you to send money to someone from your personal bank account. It is a legal document that tells a bank to give a certain person a specified amount of money from a particular bank account.

You can fill one out and give it to almost anyone, and they can deposit it into their bank account or cash it out. The money will be taken from your account.

However, a bank check is drawn on the bank's funds rather than yours. It is essentially guaranteed not to bounce, unlike a personal check.

They generally settle faster than personal checks, which means funds may be available sooner after a cashiers check is deposited than a traditional personal check. Check out this guide to learn more on bank checks, certified checks and personal checks

???? How are checks processed?

All checks must be processed – or cleared and paid – via the payment system. Here's how it works. When you deposit a check into your account, your bank sends the check to the bank of the person who wrote the check.

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This bank ensures that the check is legitimate and that there are sufficient funds in the check issuer's account to cover the check, then sends the funds to your bank. 

This process can take a few days, but for most checks the bank makes the funds available to the customer immediately. However, it is not until your bank has received confirmation from the checkbook bank that they know for sure that the funds are available.

What most people don't realize is that until the bank receives this confirmation, they are actually advancing the money to you.

???? The components of a bank check

If you wish to issue a bank check to clear a debt or make a purchase, respect the following elements:

The date of the check

Checks are drawn on a specified date. The date can be any date you want and it does not have to be the date you actually write the check.

But a check has a validity period from the date indicated on the check. A personal check is good for six months, while a business/company check is only good for three months.

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Additionally, some commercial checks are issued with specific validity periods of less than three months. For example, dividend payment checks are generally issued with a validity period of one month.

The date on a check is important because the recipient of the check can cash a check on or after the date of the check and during the validity period. Cashing a check is the term used to convert a check into real money.

Beneficiary's name

The "payee" section allows you to write the name of the person or company who is supposed to cash the check. But if it is a business check, banks limit its cashing only by the person whose name appears in the Payee section.

You can also write the word "Cash" as a beneficiary instead of a person or business name.

This means that the check is intended to be used like cash. Anyone who holds the check can cash it at the counter of a bank branch. Additionally, you can give a cash check you received from someone to another party along with a method of payment.

The amount to be collected

You must enter the amount to be collected in digital form in the box provided. The amount you write here must be the same as the amount you wrote in words. Otherwise, the check will be rejected by the bank.

You must also write the amount of the check in words on the dotted lines provided. You must write it in a language understood by any bank branch.

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An authorized signatory

When you open a checking account, you provide a sample of your signature to the bank. You must put the same signature to validate your checks.

This area is right below the box where you wrote the amount in numbers. A check without a correct signature is an invalid check even if all other sections are completed correctly.

Joining checking accounts may have one or more joint account holders who must sign a check. You indicate at the opening of the account the number of signatures necessary for a check to validate a check. This is usually one or two signatures.

Having multiple signers on a check to be valid is common practice for business checks and is used as a form of fraud prevention since two parties will verify the check before signing. Such a check usually also bears the stamp of the company.

The machine-readable zone

All checks have a white horizontal area at the bottom of the check. It is printed with numbers and special characters using a special ink called magnetic ink and with a special font. This is a machine readable file and you should not damage this section of a check.

Banks feed the check they receive to check scanners and this area is read by the machine. Characters printed in this area are called magnetic ink characters.

???? How to deposit a check with your mobile phone?

You may have heard of a new way to deposit your checks. Mobile or remote check deposit allows you to take a picture of your personal check, business check or money order (depending on the bank) and deposit it electronically using your mobile device. Many banks around the world now offer this service.

Le process is simple. Sign the back of your check then log into your bank's mobile banking app, choose the photo deposit service and follow the instructions. The process is secure and your financial information is not stored on your mobile device.

All financial information is also securely encrypted. You can then write “ deposit » on the check and store it in a safe place for a short time (two weeks is usually recommended) before destroying it.

???? When might you need to use a cashier's check?

Cashier's checks are generally intended for use when you need to make or receive large payments securely. Situations in which you may need to issue or receive a cashier's check include:

  • Buy or sell a vehicle
  • Buy or sell a house
  • Pay a deposit for an apartment
  • Pay tuition and university fees
  • Paying off a large personal debt to a friend or family member
  • Receive a lump sum as part of a lawsuit settlement
  • Receive a lump sum withdrawal from an investment or retirement account

You can also choose to get a cashier's check in any situation where you need to make a payment, but you don't want the payee to have your information. Bank account.

???? How to avoid bank check scams?

Sometimes criminals create counterfeit checks or change the name or amount of a legitimate check. It is fraud. There are a number of steps you can take to protect yourself against check fraud. Here are my tips:

  • Always keep your checks in a safe place.
  • If you close your account, shred all unused checks.
  • If you receive a check that does not appear legitimate, request another method of payment.
  • Stick with trusted payers. Beware of cashier's check payments from companies or individuals you don't know.
  • Check cashier's checks before acceptance. Before accepting a bank check as payment, contact the issuing bank. This will allow you to verify that the check is genuine.
  • Look for obvious red flags. Some obvious signs that a bank check might be fake include smudged handwriting or missing details. One can for example have the lack of routing number or the watermark of the bank.
  • Wait for the check to clear. Do not make payments or purchases against the cashier's check amount until you have verified with your bank that the check has cleared. If the check bounces, you pay a bank overdraft fee.

???? The advantages and disadvantages of bank checks

Cashier's checks can offer several benefits when making payments, but there are a few potential downsides to keep in mind. Here is an overview of the advantages and disadvantages of a bank check.

Advantages of bank checks

Payment is secure. Since the funds are withdrawn from the bank account and guaranteed by the bank, you do not have to worry about the return of the check for insufficient funds. This can help you avoid overdrafts and returned payment charges.

Availability of funds may be faster. Banks use funds availability policies to determine when deposits will clear. For example, some payments can take up to five business days to clear, or longer for large deposits.

Since the cashier's check is guaranteed, the hold period may be shorter than payments by personal check.

Security is increased. A cashier's check can reduce the risk of check fraud since only the person to whom it is issued can cash it. Bank checks have enhanced security features, such as watermarks, to prevent fraudulent duplication.

Disadvantages of bank checks

They are not infallible. Cashier's checks are more secure than other types of check payments, but they can still be the target of fraud. Fraudsters can create genuine-looking bank checks to pay you that are only revealed to be fake when you try to deposit them at your bank.

Bank checks usually come with a fee. While some banks may offer cashier's checks for free, this benefit may only be available if you have a premium checking account. Most often you will pay a fee about $10 for a cashier's check.

You must go to your bank branch. Although you can easily write a personal check from your checkbook at home, you will usually have to go to the bank to get a cashier's check if your financial institution doesn't allow you to order them online.

This can be difficult to do if you need to make a payment outside of normal banking hours. For example, Trying to buy a car on a Saturday may require waiting until Monday if your bank doesn't have weekend or evening hours.

🌿 Summary...

Overall, a bank check offers higher security than using a personal check or money order. Different transaction types are suitable for different payment types.

For larger transactions, providing (or receiving) a cashier's check may be the best choice. Before you leave, here is some training that allows you to master trading in just 1 hour. Click here to buy it.

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