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Article 12
The 6
Risks of Using Personal Checks
Tal Boldo -
July 12, 2011
Like many Americans, I use my
debit card more often than personal checks. But
there are instances when electronic payments are
not offered, or when paying by debit card may
put me at risk of fraud (as when the pizza
delivery guy creates a paper copy of my debit
card as he swipes it). In addition, there are
times when clients or buyers want to pay me by
check. From years of experience using personal
checks in such cases, here are the risks I've
learned to avoid.
Stolen Checks
When my car payment and water
bill were stolen from my mailbox, my personal
checks were forged by the thief and cashed for
four times the original amount, withdrawing
$1,600 from my checking account. Though my bank
ultimately reimbursed me, I had to prove that I
had not written the checks despite the fact that
my signature was on them.
To protect yourself against check fraud, use a
fraud-proof pen with ink that can't be washed
off your check (you'll find cheap options
at office supply stores). And drop your envelope
in a post office mail collection box instead of
leaving it in your own mail box.
Risk of Insufficient
Funds
If you miscalculate your bank
balance and your personal check bounces,
you'll incur double fees.
Your bank will charge you for a bounced check,
while the person you wrote the bad check to will
be charged for a failed transaction, a fee that
he will pass on to you. To avoid this risk of
double penalty, enroll your checking account in
your bank's overdraft protection plan. Your bad
check will then be accepted, preventing a fee
from the recipient bank, though you will still
be charged an overdraft fee from your own bank.
Cost of Checks
There are three risks involved
with ordering checks. You may make a mistake in
the personal information printed on the check
and have to pay for a corrected order. Your
address or phone number may change before you
use up all your checks. Or your checks may be
stolen while on their way to you. To avoid these
risks, carefully review your order before buying
checks. Order one box of
checks at a time in case your information
changes in the near future.
Shop around with check
printing companies instead of ordering
directly from your bank. And
ship your checks by
express mail, which is safer and allows
you to track your package.
Cashing Personal Checks
If you wish to cash a personal
check without a bank
account, consider your options carefully.
If you visit a branch of the same bank from
which the check was written, you may have to pay
a small fee for the service but you will likely
be able to cash the check without waiting for
the funds to clear. For an out-of-state personal
check, your best option for receiving the funds
immediately is a check cashing store. However,
most will charge a 5% fee ($50 for a $1,000
check). If you have a Wal-Mart near you, visit
their in-store check cashing service which
charge a nominal fee of $3 for a $1,000 check
and even less for smaller amounts (see
restrictions).
Risk of Accepting
Personal Checks
Unless you are cashing your tax
refund or a check from an established company,
you stand the risk of incurring
bounced check fees
every time you deposit a personal check. In
addition, between the time you make the deposit
and the actual clearing of the funds, the
writer of the check may
place a stop payment with his bank, in
which case any credit of the funds to your
account will be withdrawn by your bank and you
will be charged the failed transaction fee. To
protect themselves, small businesses typically
refer to a "bad check list" for information
about persons passing bad checks. But as an
individual, it is best to
accept personal checks from people you know and
trust only.
Check Scams
When I advertised my Ducati for
sale on Craig'slist, a buyer offered to get the
bike sight unseen. "After you deposit my check,
you can ship me the bike," he said. Had I done
so, the out-of-state check would have bounced a
few days after the bike was gone. According to
Fraud.org fake checks are
commonly used for advances, down payments, and
purchases. Once the victim deposits the
check, he is asked to wire a fee or release
merchandise. Only after several days does he
realize that the fake check never cleared. To
avoid the risk of check scams,
always wait seven days for
a check to clear if you are dealing with
someone new. Do this even if your bank reflects
the funds in your account immediately, because
when a check bounces your bank will withdraw the
funds.
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