Friday, April 20, 2018

7 Reasons Why a Check Can be Rejected by the Bank

Checks are still used by businesses and individual to pay for all kinds of services and products. Checks are much like a banking form that instructs banks to transfer funds from a particular banking account to another bank account. 

Considering the fact that checks are susceptible to fraud, banks have strict rules and violating them can cause your check to get dishonoured. In which case, the money is not transferred to the recipient’s account and the issued check is rejected by the bank. 

Whether you are the recipient or the person who wrote the check, dealing with a bounced check is frustrating. To bring clarity to the situation, here’re 7 reasons your check might have been dishonoured.

Insufficient Balance 

This is probably one of the more common reasons why checks get rejected by banks. However, this is an easy problem to detect. If you are the one who has issued the check you probably already know if your account has enough balance to clear the amount. 

In some instances, checks get bounced because banks suddenly deduct annual fees and other charges before clearing the check. The best way to find out if your issued check got rejected due to insufficient balance is by going online and checking the account statement.

Early Presentation of a Post-Dated Check

If the check is presented to the teller before the mentioned date then it can be dishonoured. No such rules apply if the check is presented after the mentioned date. However, some checks do have expiry periods.

Expired Check

If you are thinking of saving your first paycheck like some sports personalities do then you should know that you may not be able to cash it later. Checks have expiry dates and past a certain point, banks don’t accept them anymore. 

These checks are typically called stale checks. Instead of dishonouring the check banks often asks the account holder to issue a new check.

Signature Mismatch

People with multiple bank accounts often use different signatures for different banks. Mistakenly signing the wrong signature will result in the check being dishonoured. 

Banks use imaging technology to verify signatures on checks. This means if you have trouble signing with consistency, the signature may be deemed as a mismatch.

Overwriting and Other Mistakes

This is a part of check writing 101. Any overwriting or illegible letters can cause the bank to void the check. Misspelling the payee name can also result in rejection.

Checks Linked to Frozen Bank Account

Banks freeze bank accounts for all sorts of reasons. Without going into why banks freeze accounts, it’s important to know that if they do any transaction from the said account is temporarily halted. Considering that paper checks are mere instructions for banking transactions, checks linked to frozen accounts are rejected by banks.

Check Doesn’t Match Banking Security Standards 

Businesses and individuals no longer need to buy checks from the bank. They can buy checks from third party vendors and online check stores. However, when buying cheap checks online, it’s important to verify if it matches all banking security standards and regulations. Producing checks that do not match the quality standard laid down by the bank can be rejected.

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