We’re getting closer to a cashless society, but we’re not there yet. Checks are still widely used in the United States, despite the growth of electronic payments, debit cards, and credit cards. According to a Federal Reserve report, more than 3.767 billion paper checks were issued in 2020 alone, with a total value of $7.875 trillion.
While writing a check is simple, cashing one can be difficult. It’s critical to be prepared if you’re going into a bank or credit union with a check. To avoid problems, go over the top reasons why a bank might not cash your check.
Key Takeaways – Required
When cashing a check, you must present a government-issued photo ID.
If the check is made payable to your company, ensure that you have a business account at a bank and that your company is properly registered with the state.
To cash large checks, banks may require advance notice.
Checks that are “stale-dated” can be difficult to cash.
While writing a check can be a nightmare at times. Examine some of the most common reasons why a bank will not cash your check.
You do not have a user account there.
A bank is not required by law to cash a check if neither you nor the check’s writer has an account with that bank.
If the check was written by someone who has an account at that bank, the bank may honor it if there is sufficient money in the account.
You Lack Proper Identification
Banks must protect themselves against check fraud. A bank may refuse to cash a check made out to your name if you do not provide proper identification.
When you intend to cash a check, always bring proper government-issued identification, such as a driver’s license or passport. Even if your picture is on the proof, the bank may insist on it being “valid” or “current.”
In some states, banks are permitted to swipe the magnetic stripe of a driver’s license or identification card issued by the Department of Motor Vehicles as a condition of cashing a check, as long as they stay within the legal boundaries of what they can do with that information.
The Check Is Made to a Business Name
Assume a business owner wishes to cash a check made payable to the company. Walden Schimt, the owner of Walden Landscaping Services LLC, for example, wishes to cash payment from a customer.
That may appear to be innocuous, but it may not be cashable if the owner has not followed a few simple—but necessary—procedures.
Walden has just completed a large project and has received a check made payable to Walden Services LLC. He attempts to cash the check at a nearby bank, but the teller refuses to complete the transaction unless John can provide proof of valid state business registration.
To avoid the problem, business owners must take two steps:
Complete the business’s registration with the state government. The most common type of state business registration is the limited liability company (LLC). Corporations, non-profit organizations, and partnerships are examples of others.
Open a business account at the bank in the name of the company.
Both of these steps are required for other reasons, most notably tax filing, but they will also save you time at the bank.
You may be charged a check-cashing fee if you do not have an account at that bank, especially if you go to the payor’s bank.
Without advance notice, not all bank branches can handle large cash transactions. Credit unions and smaller branches of large national bank chains may not have enough cash on hand to process a large check.
For example, a bank may keep $50,000 available for customer transactions on a daily basis. It will not give most or all of it to a single customer and then inform the next customer that the bank is out of cash.
When you have a large check, contact the manager of the bank branch you intend to visit ahead of time. The bank manager will advise you whether you should come in by appointment, go to the main branch, or even come in without an appointment, go to the main branch, or even go to another bank that can handle the transaction.
Some checks include notices that they will become void after a certain period of time. These checks are referred to as stale dated once that date has passed.
Some checks can become stale-dated as early as 60 days, while others can become stale as late as 90 to 180 days. While the Federal Reserve regards those notices as guidelines, some banks are extremely conservative and refuse to budge.
A bank may refuse to cash a check if you wait too long. A bank may refuse to cash any check that is more than six months old. Some banks may decide to cash it anyway as a courtesy to a long-term customer, but this is entirely at the discretion of the bank.
Another reason a bank may be unable to cash an old check is that the routing number of the institution that issued the check may have changed due to a merger or acquisition.
Payment Requests on Hold
If a bank refuses to cash a post-dated check (one with a future date on it), the bank may be acting on instructions from the person who wrote the check.
Under state law, when someone gives your bank advanced written notice to not cash a post-dated check, the request is valid for six months. The oral notice is only valid for 14 days. Banks are required to strictly adhere to their client’s requests.
Discover the most common barriers to cashing a check and take action to avoid a cash flow gap. While it may appear to be a no-brainer to grab a check and try to cash it right away, you should be on the lookout for red flags that indicate a check will be difficult to cash.