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Do you have a checking account? If you don’t, then you’re definitely going to want to get one.
I know … writing a check can seem like something only your grandparents do. And it's easy to understand why.
In today’s world, I can autopay all of my bills, connect my bank account to my investments, and pretty much buy anything I want with a credit card.
With convenience like that, writing a check seems to be about as practical as using a typewriter or watching VHS tapes.
But the reality is that checks are still a very integral part of our financial system. In fact, I have personally run into many situations where writing a check was the only viable payment option (more on that to come).
In this post, we’re going to dive further into what checks are and how to write them.
We’ll also talk further about why you’ll want to have your checkbook ready and waiting for those times when it may be the only way to pay for something.
What Is a Check?
A check is an instrument of payment. It's essentially a written order where the person writing the check (the payor) gives the bank permission to release money from their checking account to the person or business to whom the check is written (the payee).
The benefit of using checks is that they’re safer and easier than cash.
Can you imagine if payday with your employer consisted of people lining up to be physically handed hundreds or even thousands of actual dollar bills?
Not only would this be a huge liability for everyone involved, but it would also be a giant mess!
Believe it or not, checks have been around since the 1500s.
The idea started when the Dutch began writing promise notes or IOUs that would allow their cashiers (the people they deposited their money with) to release funds to specific individuals.
This concept caught on spreading to England and eventually also came to the U.S.
What are the Different Types of Checks?
I’ve been writing checks my whole life. And yet I’m still surprised by how many different types exist. Here’s a brief list:
- Personal check – The most common type of checks used by the public. Personal checks give the bank permission to release funds to payees from the payor's checking account. However, if the payor doesn't have enough money to cover the check, it will go unpaid or “bounce”.
- Certified check – A personal check that has been guaranteed by the bank to not bounce after first checking your account has enough funds to cover it. Certified checks can be differentiated from personal checks because they’re stamped “certified”.
- Cashier’s check – A check that is issued by the bank after first withdrawing funds out of your bank account. Cashier’s checks are more secure than personal checks because the money has already been withdrawn from your account, and so it cannot bounce.
- Electronic checks – Digital versions of paper checks that are sent when someone pays their bills online through their bank portal.
- Order check – This is a check that can only be paid to the person to whom the check is written to. Most common checks are order checks.
- Bearer check – Instead of going to a specific payee, the person who receives this check will be entitled to receive the proceeds.
- Crossed check – This is a special type of check where it can only be deposited into a bank account and not cashed. Crossed checks are indicated by two parallel lines in the upper left corner.
- Post-dated check – Checks that may only be cashed after the specific date written on the check.
- Stale check – A check that is no longer valid.
- Traveler’s check – Checks from one country that can be cashed for currency at the bank of another country.
How to Write a Check
If you’ve never written a check before, don’t worry. It’s pretty darn easy.
Here’s everything you need to know about the process of writing a check:
1. Order Checks If You Don't Already Have Some
Most people get their first set of checks from their bank when they open their checking account. You can always order more, but I’ve found them to be incredibly expensive.
For instance, my bank charges around $20 for one box (100 checks). By contrast, I can go online to a discount check vendor and order a box starting as low as $7 for one box.
Of course, if you’re going to order checks online, do a little investigating and make sure the vendor is legitimate. After all, you are giving them your checking account information.
2. Fill in the Check
Essentially, a check is like a tiny order form. It will require you to manually write in the following information:
- The date – By default, always put down the date you write the check. On the off chance that you’d like to post-date the check, then you can write in a future date.
- The payee – This is where you write in the name of the person or business that you wish to receive your money. It’s common that if the payee’s information does not take up the whole line, then you fill in any blank space with a single solid line (for security purposes).
- The check value (using numbers) – Enter how much the check is for (indicating both dollars and cents).
- The check value (using words) – Banks also require you to write the value of the check as a double-check. Again, if you don’t use the entire line, then you can fill in the blank space with a single solid line.
- Add a memo (if needed) – Use this space to write a short note about what the check is for or to put your vendor account number if needed.
- Sign your check – Your check is not official until you add your signature to the bottom.
3. Enter the Check Into Your Checkbook Ledger
After your check has been written, the last step is to record the transaction. This can be done by using the paper ledger that’s included with your checkbook.
Classically, this ledger is meant to keep track of all of your bank transactions.
If you’re old-school like me, then you still use it to double-check your checking account balance at the end of each month.
However, with account information being available online or through a smartphone app, this much detail may not be necessary.
If you don’t want to record every transaction, that’s fine. But at a minimum, I would still recommend that you at least write down the check number, the payee, and the check amount.
The benefit of doing this is that you’ll be able to properly balance how much your banking app says you have versus how much you really have in your account.
For example, if you’ve got $5,000 in your checking account and you write a check for $1,000 that doesn’t get cashed for 3 weeks, then your banking app is going to still say you’ve got $5,000.
But in reality, you know that you’ve only got $4,000 available to spend.
Once the check clears, put a checkmark next to it in the ledger. This will be a quick way for you to know that it's no longer outstanding and is already included in your bank app balance.
Why Do People Still Use Checks?
I’ll be the first to admit – I don’t like using checks if I don’t have to.
I’d much rather buy everything with my credit card (and get rewards points) or make a direct payment straight from my bank account with cash or a debit card.
However, given some circumstances, paying for something with a check may be your only viable option. Consider the following:
Not Everyone Takes Credit Cards
Whenever I call a contractor to do work at my house, 99% of the time they expect to be paid by check (or cash). A lot of them either are set up to accept credit card payments or refuse them altogether.
Why? Because credit cards charge a processing fee for each transaction.
Though prices will vary, it’s usually something like 3% of the total amount.
Some small businesses have started passing these processing fees on to their customers by charging them an additional 3% on top of the agreed amount.
When they do this, it’s cheaper and easier for me just to pay by check instead.
Not Everyone Can Accept Wire Payments
The last time I bought a car, I had enough money to cover the entire purchase.
The easiest thing to do would have been to just wire the money directly from my checking account to the dealership.
But this wasn’t possible. Instead, the only available options were to pay by check, credit card, or cash (which also happens to be limited to $1,000 per day).
This is true with a lot of service providers.
Not only do you not want to go around giving out your bank account information to everyone, but they’re not set up to offer this type of service anyways. Simply put, it’s just quicker and easier to write someone a check.
Again, it’s a heck of a lot safer to write someone a check than to hand over a huge stack of hundred-dollar bills. That’s just an invitation for it to get stolen.
First of all, it's not smart to have that much money on you in person or sitting around in your house.
Secondly, it’s a really bad idea to send large quantities of money through the mail.
However, with a check, it’s much more difficult to steal. They would have to prove they are the payee listed on the check. Even if they were successful, there would then be a paper trail to figure out who stole it.
Finally, checks provide a convenient means for people and businesses alike to keep track of their transactions.
I find this to be extremely helpful when I’m preparing my budget. I can open my ledger to see what I paid throughout the year and what it was for. With cash, you wouldn’t have that same level of detail.
Additionally, checks also provide proof that the transaction ever took place.
When a business claims they never received my payment, I can pull up a picture of the cleared check from my bank and send it to them as proof. Again, you can’t do that with cash.
What to Expect When Paying By Check
If you're new to check writing, then here a few more things you'll want to know about the process:
- They may take a while to process. Depending on when the person cashes the check, it may be days or even months before it clears from your ledger.
- Always have enough money to cover the check amount. You can't write checks on faith. If you get paid on Friday, don't write a check on Monday thinking that it will be covered. More than likely it will bounce and cause your payment to be late.
- There's more than one way to cash a check. 30 years ago, the only way to cash a check was to go into a bank branch. Now almost every bank will let you cash it through their ATM or at home through their banking app.
- Checks will eventually expire. If someone gives you a check, deposit it sooner rather than later. Most personal checks will only be honored for 180 days. Some business checks will explicitly say “void after 90 days” right on the face of the check.
- What if you make a small mistake on a check? If you make a small error while filling out the check, you can strike out the mistake and put your initials next to it. The check is still good to use.
- What if you make a large mistake on a check? If you fill out the check wrong or simply decide that you no longer want to use it, then you can write VOID on the check or simply rip it up.
- What if you send someone a check with a mistake on it. If you know the person you gave the check to, then the best thing to do is call them and tell them to tear up the check (and you'll replace it with a new one). However, if the check goes to someone you don't know, then you may have to call the bank and put a stop to it.
Checks are still a very important tool in our financial system. They are much safer and more convenient than using cash to pay for things, especially when it comes to larger transactions.
Writing a check is as simple as stating who it will go to, how much it will be worth, and then signing it.
Although most people will use personal checks throughout their lifetime, there may be times when other types of checks are needed.
In our digital age of credit cards and online banking, writing a check may seem like an ancient and outdated system.
But remember that many businesses and contractors are not set up to accept credit cards and bank transfers. For that reason, keep your checkbook around and ready to use whenever it's needed.