Why Check Writing Remains a Favored Method of Payment

By Ryan Laspina
Senior Specialist, Red Flags and External Reviews

Despite all of the technological advances today, the personal check remains one of the most commonly preferred forms of payment. It’s also one of the most secure methods for financial transactions.

Many Americans still write personal checks to buy groceries, make rent or car payments, and cover unexpectedly large household purchases. Yet, check writers often fail to routinely balance their checkbooks. Not knowing precisely how much money is in your account can lead to overdrafts and stiff financial penalties. In rare cases, writing personal checks blindly and continually can lead eventually to bankruptcy.

Here are some basic facts regarding personal checks:

1. Nearly all institutions will accept personal checks as payment with proper identification. Some smaller, family-owned businesses may not. If you are planning to make a payment with a personal check, first make sure that using checks is acceptable.

2. The amount you write on a personal check is deducted from your bank account when the check is cashed or deposited. By regularly updating and balancing your checkbook, you will always know if you have sufficient funds to write a check. An overdraft, which is a check written for an amount larger than your bank account balance, usually carries a hefty fee.

Also, you may not be able to write checks for payments at certain places if you have written a check that bounces. Some banks offer overdraft protection for a fee, which acts like a small bank loan. You must pay back the loan with an interest rate set by the bank.

3. For certain actions, you might need to present a voided check. For example, most employers require a voided check to initiate direct deposit transfers for your paychecks. The only thing you need to do is to write “VOID” across the face of the check.

4. Your account number and the bank’s routing number are at the bottom of your personal checks. You will need these two sets of numbers to set up direct deposit for paychecks and for automatic withdrawals to pay recurring bills such as mortgage or insurance payments.

5. If you receive a check for payment, reimbursement or a gift, you can either cash it or deposit it into your bank account. As long as your name is on the check next to “Pay To The Order Of” and you have a valid ID, you can cash the check anywhere check cashing is offered. But it’s best to cash it at your bank and avoid the service fees other institutions charge.

To deposit a personal check, you can take it to the bank and either endorse it with your signature or write “For Deposit Only” and your account number on the back of the check. Some banks now permit you to deposit checks electronically, using your smart phone and the bank-supplied app.

Personal checks are not the only checking instruments available to you. A cashier’s check is one that is actually written and guaranteed by the bank. This type of check will not be returned for insufficient funds nor cause you to pay an overdraft fee.

To obtain a cashier’s check, you must pay the full amount in cash or have it debited from your bank account. There is usually a bank fee for this service. Travelers’ checks, as the name implies, are acceptable throughout the U.S. or in other countries. They are issued by established banking institutions, such as American Express, in various denominations and world currencies.

However, many banks no longer issue travelers’ checks. It’s wise to call your bank beforehand or go online to learn where they are sold.

The best advice regarding personal checks is to never write a check that your bank account cannot cover. Overdrafts will cause you lots of problems. As always, use good budgeting techniques to make sure you write checks responsibly.