What the Heck is a Check? - Part 3

This week, I will finish out this blog series, ‘What the Heck is a Check’ by addressing a few security issues.

Is it safe to pay with a check?

As mentioned previously, checks are a great way to pay a small business or track when your taxes or other government payments have been paid. However, they are not the best form of payment to use when paying someone you don’t know. Your check usually will have the name of your bank printed on it and the numbers at the bottom of the check contain your account number and routing number. Therefore, if you’re paying someone you don’t know or possibly just don’t trust, you might be better off using cash, a money order, or an electronic form of payment for better protection against fraud or identity theft.

What happens if my check bounces?

First and foremost, you should never write a check if you don’t have the funds in your account to pay for it. Doing so could cause your check to “bounce” meaning it will be returned for insufficient funds. We’ve all made mistakes but writing down the payment either as a line item in your monthly budget or in a check ledger should help you remember you made the payment, so you don’t overspend. Writing bad checks is also illegal in some states and causes returned check fees at the recipient’s bank and an insufficient funds charge at your institution. If you write too many bad checks, the bank may decide to close your account and you could then have difficulty finding another bank that will allow you to open a checking account with them.

What does it mean to place a “stop payment” on a check?

If you write a check and it gets lost or if you lose a book of checks, it’s best to place a stop payment on these types of items to prevent fraud. Each check in your checkbook has a number in the upper right corner to identify it. By telling the bank to not pay out a certain check number or range of check numbers, it can help to keep the lost items from being cashed by an unintended recipient. Some banks do charge stop payment fees, so check with your bank or credit union to see what their policy is on this issue.

I hope this Adulting 101 series on checks has helped to build your knowledge and confidence to use checks in your personal or professional financial lives.

- Margaret Gooley, CFP®, Worley Erhart-Graves Financial Advisors