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Why you shouldn’t get your bank cheque from a bank

The number of people paying by cheque has taken a dramatic dip in the era of internet and mobile banking, yet bank cheques remain a relatively safe and easy way to pay.

Bank cheques are drawn straight from your account and remove the need to lug around large wads of cash, which is ideal if you’re placing a downpayment on a new home or buying a secondhand car. However, this convenience comes at a cost.

Financial site Mozo compared the prices of bank cheques issued by the major banks with those from other institutions such as credit unions and building societies and found charges vary from $5 to $15.

Fees can also range within banks, depending on whether the cheque is issued online or in a branch.

We found Commonwealth Bank and Citibank among the most expensive for bank cheques, slugging customers with a $15 fee apiece, tailed by NAB at $12 and ING Direct at $11.

The fees were relatively lower at the smaller end of town, with non-banks Gateway Credit Union, Hunter United and Newcastle Permanent charging customers $5 for a standard bank cheque.

Of the big four banks, we found Westpac’s cheapest, which charges customers as little as $5 for issuing a bank cheque online. For those who prefer to go into a branch, Westpac and ANZ were found to offer the best value with an issue fee of $10.

These fees might seem minuscule compared with the other banking fees you pay, but the reality is that they can add up over time, especially if you need to pay this way regularly.

In this case, it would be worth checking with your bank if you can request a bank cheque online for a smaller fee.

For those looking for an alternative to bank cheques, money orders are usually issued and payable at a bank or post office and offer a more secure option than sending cash in the mail.

For a standard money order up to $5000, Australia Post charges $8.95, which is lower than what many banks charge for a bank cheque. The price is even lower if you want an online money order.

Mozo’s comparison found Australia Post to be much cheaper than money transfer agents such as Western Union and MoneyGram, whose fees vary depending on the amount you want to send.

While bank cheques and money orders are convenient payment options, money orders are generally capped at around $5000.

This means they aren’t as practical as bank cheques in situations where you need to pay large sums.

Instructions and Problems With Signing a Check Over

When a check is payable to you, you’re the only person who can do anything with it. You can potentially sign the bill over to somebody else (so they can cash it or deposit it), but that practice has several pitfalls. 

When all goes well, though, another person can use a check that’s made out to you.

How to Do It

To sign a check over to another person or a business, verify that a bank will accept the statement. If you get approval, endorse the back of the bill by signing it. Some banks require you to write. 

“Pay to the order of [Person’s First and Last Name]” under your signature, and others only require the person who is depositing it to sign their name under yours. Next, provide the check to that person so they can deposit or cash the check.

Will the Bank Allow It?

Banks might not be willing to accept checks that have been signed over to a third party (that is, somebody besides the check writer and the original payee. It’s perfectly legal to try, but banks aren’t required to honour your instructions. Banks may have policies against this practice, or they may think that a third-party check is a red flag, so they can refuse to deposit or cash these checks.

Ask before you endorse: If you insist on signing a check over to somebody else, have them check with their bank before you approve the bill.

You don’t want to add extra signatures and names to the back of the check (which can create confusion and delays at the next place you try to cash the bill). Find out if it’s allowed first, and learn what the requirements are.

Things might go more smoothly if you go to the bank with the person depositing the check, so the bank has more confidence that nothing fishy is going on. (Bring ID, of course.)

Banks are essentially giving your money to somebody else when you use this approach. Unfortunately, the risk is often too significant for them to accept. When a bank can’t verify your identity or your signature, they just have to take the third party’s word for it.

Alternative Solutions

Signing a check over to somebody is not an ideal solution, and sometimes it’s simply not an option. The strategies here might be slower than endorsing a check to someone else, but at least you can be confident that they’ll work.

If You Have a Bank Account

If you need to pay somebody with money you’ve received by check, try cashing or depositing the check yourself to avoid any hassles. The first $200 of funds will typically be available from a review within one business day (or the first $5,000 if it’s a cashier’s check). There are numerous ways to send money online for free, and those methods might be a lot easier than dancing around bank policies.

If You Don’t Have a Bank Account

If you don’t have a bank account or any other way to handle checks, consider opening an account. Some types of bank accounts can cost money, but not having an account probably costs you more—in both time and money. There are several ways to get free checking accounts, especially at local credit unions and online banks.

Exploring Checking Account Options

If it’s simply not feasible to open a bank account, you could try a check-cashing service, but those fees are typically relatively high. Several retail stores have been known to cash checks for free, especially tax refund checks.

If It’s Difficult to Get to Your Bank

If your bank doesn’t have a branch or ATM where you are, or it’s inconvenient for you to get there, these two solutions might make your life easier:

  • Mobile check deposit: Your bank might allow you to take a picture of a check—often until late into the evening for a same-day guarantee. Then you can withdraw cash or send money electronically.
  • Credit unions: If you’re a credit union customer, then you might be able to use branches of other credit unions (assuming they participate in the shared branching network).If You Want to Pay Without Cash

When your bank doesn’t offer mobile deposit or you’re looking for an inexpensive solution, prepaid debit cards might meet your needs. Just be wary of high-fee cards; prepaid providers are required to disclose all fees to you before you purchase a card. If you’re trying to pay without cash because you’re concerned about theft (in the mail, for example), write a check or pay with a money order instead.

Depositing a Check for Somebody Else

If somebody asks you to deposit a check written to them, think carefully before you do so. You are risking your own money and your good standing at the bank if you agree. If the check bounces for any reason, your bank will demand that you replace the funds, even though the review was written to your friend—or by somebody else entirely—and you were just trying to do somebody a favour.

If you deposit a bad check, the funds will eventually be taken from your balance, and your account could go negative (resulting in a chain reaction of problems). You can try to collect funds from your friend, but this is often difficult. Also, never agree to cash a check for a stranger because it’ll likely be a scam.

Don’t Get Scammed

How can you lose money by helping somebody? Your bank will often allow you to get cash from a check immediately, or the funds appear in your available balance, making it look like you can spend all of that money if you want to.

Later, your bank processes the check and tries to collect money for it. It can take days or weeks for your bank to find out that a review was bogus, so don’t hand over cash unless you trust the person you’re helping.

Unfortunately, if you cash a check for somebody else and the review is terrible, your bank will not reimburse you.

You’ll have to ask that person—if you can find them—and possibly bring legal action to collect the money.

Parts of a Check and What the Numbers Mean

Checks don’t come with instructions, and if you make mistakes when writing one, it could affect you financially. But once you understand the different parts of a check, you’ll feel confident completing, receiving, and depositing paper checks.

Checks contain pre-printed information that’s important to understand, as well as blank sections that need to be carefully and accurately filled in each time you write a review.

In addition to being necessary for writing a check yourself, understanding the parts of a review helps you:

  • Order new checks. 
  • Make sure check orders come out correctly.
  • Set up direct deposit instructions.
  • Verify that any checks you receive are filled out correctly.

Reference the examples of a completed check and a blank check as you read through a detailed explanation of each component.

Parts of a Check: An Overview

Each of the blue numbers corresponds to an essential aspect of this blank check. Scroll down for both the name and purpose of each of these sections. Some elements of a review are self-explanatory, such as the date. Others have exciting quirks unique to check writing, such as writing out dollar amounts with words.

  • The personal information section provides details about the account owner, who is the one paying money.
  • The payee line designates who can receive the money.
  • The dollar box displays the value of the numerical check-in format.
  • The amount of your check is written out in this section using words instead of numbers.
  • The memo line is a space for any notes about the purpose of the check.
  • The dateline serves as a timestamp for the check.
  • The signature line verifies that the account owner has approved the payment.
  • Your bank’s contact information and logo are usually printed on the check.
  • Your bank’s American Bankers Association (ABA) routing number tells banks where to find the funds for the check.
  • Your account number at your bank is another identifier that lets the recipient know where the money for the check will come from.
  • The check number (note that this appears in two places) is a security measure to identify each payment and prevent fraud.
  • Your bank’s fractional ABA number contains the same information as the ABA in list item 9, but it’s often presented in another format in the upper right corner of the check, as well.

The back of a check, which isn’t pictured here, includes a space for endorsements. A review is supposed to be endorsed or signed by the recipient before it is deposited or cashed.

Personal Information

The upper-left corner of a check typically shows personal identifying information about the account owner, and it is almost always pre-printed on checks.

This section generally includes:

  • Your name
  • A home address
  • Your phone number

This information is usually either the contact information associated with the bank account or the contact information you choose to have printed when you order checks from your bank.

If you’re concerned about privacy, you can limit the amount of information on your checks or take steps such as using a post office box instead of your home address.

It’s not uncommon for retailers to require specific details to accept a check. They may handwrite your phone number on the bill, for example. This makes it easier for them to protect themselves in case of check fraud.

Payee Line

In this section, you specify who will receive funds from your checking account. Write the name of the person or organisation you wish to pay, also known as the payee. Only the payee can deposit the check, cash it, or endorse it to someone else.

Use the recipient’s full name, rather than a nickname, to avoid any confusion or difficulty for the person depositing the check.

If you don’t want to name a specific person or organisation, it is possible to pay your check in the order of “Cash.” However, this is risky because anybody can cash the check, not just your intended payee.

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Dollar Box

Write the amount of your numerical check-in format (for example, “1,250.00” instead of “one thousand two hundred fifty”) in the dollar box.

For security, you want to make it as difficult as possible for someone to alter the number you write in this box.

  • Write the numbers as far to the left as possible.
  • Enter a decimal and any numbers after the decimal.
  • Include “.00” for round dollar amounts.

This box is sometimes called the “courtesy box” because it appears on the check as a courtesy or convenience. The number in this box is not used to determine the legal amount of your review. Instead, the official amount comes from the line below, preceding the word “DOLLARS.”

In theory, both amounts should match, but sometimes they don’t. In those cases, the written words take precedence over the numbers in the dollar box.

Check Amount Written Out With Words

On this line, write the amount of your check using words (as opposed to using numerals). For example, if you write a review for $10.50, you would write “Ten and 50/100” in this section.

If there is space either before or after the amount you write out, you may want to strike through it with a single line to prevent anyone from altering the value of your check.

On this line, cents are written as fractions of a dollar rather than as whole cents. Since there are 100 cents in every dollar, but the number of cents above the number 100.

If there’s any difference between the dollar box and the amount written in words, the bank should ignore the dollar box. That’s because words are more complicated to alter than numbers.

Memo Line

The memo line can be used to write an unofficial note on your check. This is entirely optional, and it can be written in informal terms. Use the memo line to:

  • Add details for your recordkeeping
  • Include an account, invoice, or transaction number for paying bills
  • Add notes when you’re writing checks to friends or family

You don’t necessarily need to get everything on the memo line. You can write additional information just about anywhere on the front of a check, as long as it doesn’t cover up any critical information. However, you should not use the back of the bill for writing any memo information.

Date Line

Enter the date in this space. If you want to delay the transaction, you can write a future date and notify the bank.

However, you can’t simply post-dated checks and expect the bank to delay the transaction. Banks generally have no obligation to adhere to the date written on the review unless you explicitly notify them.

Generally, if you notify your bank or credit union about a post-dated check promptly, that notice is valid for six months. If you inform them verbally, rather than in writing, the information is helpful for two weeks. In that time, they should not cash the check before the date written on it.

Signature Line

The payer signs the check at the line on the bottom right-hand corner of the bill. This is a security feature, and the signature can be compared to the account holder’s signature on file.

Signing is the last step of writing a check, and it should only be completed after double-checking all other sections of the bill. If you sign an otherwise blank check and lose track of it, whoever finds it can put whatever they want in those empty spaces.

You may find the letters “MP” next to the signature line. It indicates that the check includes a security feature called microprinting. Microprinting involves tiny words on your review that the naked eye cannot detect.

Your Bank’s Contact Information

Your bank’s name appears on every check you write. However, this section doesn’t contain important info, such as the routing number. A phone number and address may be included, or you might just see the bank’s logo.

If you received a check from somebody, this section tells you where they bank and where the money will come from. If you want to cash the check, you may be able to do it at that bank (any branch location—not necessarily at the same address shown on the bill).

However, banks have no obligation to cash anyone’s check. They may charge a fee or refuse to cash it if you’re not a client.

ABA Routing Number (MICR Format)

The routing number, found at the bottom left of your check, serves as an “address” for your bank. With that number, other banks can get in touch with your bank and collect funds from your account when you write a check.

While this is the same information as the fractional ABA, the routing number along the bottom of the check is written in a specific font with a special ink. Known as “Magnetic Ink Character Recognition,” or MICR, this allows reviews to be easily read and processed by computers.

Your Account Number

Your account number is also located on the bottom of a check, and it also utilises MICR.

In most cases, there are three numbers at the bottom of a check, and your account number is the one in the middle. Some statements use a different format, so it’s a good idea to confirm your account number. For example, business checks and checks created by an online bill payment system have a slightly different format.

An excellent way to find your account number is to look for the “⑈” symbol. Your account number appears just before that symbol.

Check Number

A check number is a reference number that will help you:

  • Balance your chequebook
  • Your bank has processed track which checks
  • Know which checks are still outstanding

Some checks have the check number printed in MICR to help prevent fraud.

This number usually appears in two places, both the upper- and lower-right corners. Again, checks may be formatted differently depending on where they are printed. A good tip for finding the check number is to look for the smallest or shortest number—that’s often the check number.

ABA Routing Number (Fractional Format)

In addition to the MICR line along the bottom of the check, the bank’s ABA routing number is generally also printed in its fractional format on the upper right corner of a review.

In some cases, the number is elsewhere, but you should look toward the upper right if you’re working with a personal check.

Like the MICR line, this number represents the bank, its location, and the Federal Reserve branch that services the bank. ABA routing numbers are more than a century old, and the fractional format helped bankers identify important information before the advent of MICR.

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