Despite the growth of electronic payments, and debit and credit cards, checks are still popular in the United States. In fact, the average American may write or receive about 38 checks each year, with more than 17 billion paper checks being issued in 2016, according to a Federal Reserve Payments Study.
While writing a check is quite simple, cashing a check can sometimes be a chore. if you're heading into the bank with your check, it's important to be prepared. To avoid any problems, review these top reasons a bank may not cash your check.
- You may need a government-issued photo ID when cashing a check.
- If the check is made payable to your business, make sure you have a business account and/or proper registration for your business.
- Banks may require advanced notice in order to cash large checks.
- Checks may not be cashed after a certain period of time, after which they become stale-dated.
- You may not be able to cash a check if the payor has given the bank a hold payment request.
You Don’t Have Proper ID
Banks have to protect themselves against check fraud. Without proper proof of identity, banks can legally refuse to cash a check made to your name.
In some states, banks are allowed to swipe the magnetic stripe of your driver’s license or identification card issued by the department of motor vehicles as a requirement to cash a check, as long as they stay within the legal limitations of what they can do with that information.
Always carry proper government-issued identification such as a driver’s license or passport when you intend to cash a check.
The Check Is Made to a Business Name
There may come a time when someone tries to cash a check written out to their business. That may seem harmless enough, unless the owner hasn't followed through with a few simple—and necessary—procedures.
For example, John Smith owns John Smith Landscaping Services LLC. His business is booming, so much so that he has not had time to complete the registration of his limited liability company (LLC) with his state government.
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.
To prevent such a scenario, owners of corporations, nonprofit organizations, LLCs, and partnerships should register their businesses with the appropriate state agencies and open business accounts under the business name.
If you don't have a bank account, you may be charged a check-cashing fee, especially if you go to the payor's bank.
Not all banks can handle large transactions without advance notice. Credit unions and smaller branches of large national bank chains may not have all the necessary cash on-site to clear a very large check.
For example, a bank may have only $50,000 available for customer transactions on a particular day. Even when that bank has the necessary cash to clear a $50,000 check, it cannot just give all of its cash to one customer and ask everybody else to come back another day.
When you have a check for a very large amount of money, call ahead to the manager of the bank branch you intend to visit. The bank manager will advise whether you should go to the main branch of that bank chain, set an appointment for you to visit her bank branch, or even suggest another bank that can handle the large transaction.
Stale Dated Checks
Some checks carry notices indicating that they will become void after a certain period of time. These checks are referred to as stale dated. Some checks can become stale-dated as early as 60 days, while others may be as long as 90 to 180 days. While the Federal Reserve considers those notices to be guidelines, some banks are very conservative and may not budge.
If you wait too long to cash a check, a bank can refuse to cash it. Legally, a bank can refuse to cash any check that is older than six months. Some banks may decide to cash it anyway as a favor to long-time customers, but that is entirely at the discretion of those banks.
Another reason a bank may not be able to cash a check that is too old is that the routing number of the institution issuing the check may have changed as a result of a merger or acquisition.
Hold Payment Requests
If you try to cash a post-dated check (one with a future date on it) and a bank refuses to cash it, the bank may be following instructions from the person who wrote the check. When someone gives advanced written notice to your bank to not cash a post-dated check, the request is valid for six months under state law. An oral notice is only valid for 14 days. To avoid any damages, banks will follow these requests from their clients very strictly.
Most business-to-business transactions are still conducted with checks.
The Bottom Line
Learn the top obstacles to cashing a check and take action to prevent a potential interruption in cash flow. While it may look like a no-brainer to grab a check and go to cash it right away, to avoid frustration you need to be on the lookout for red flags that tell you a check may be hard to cash.