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.
