10 keys to safely accept checks

E-payment, credit and debit cards have made the paper check extinct — right?

On the contrary, paper checks still account for about 21 percent or more of total payments made annually to merchants for goods and services, according to a 2013 Federal Reserve Payments study. That’s about 18.3 billion checks, worth $26 trillion.

paper checkTo paraphrase Mark Twain, reports of the death of paper checks have been greatly exaggerated.

One challenge business owners face is that there will always be some percentage of checks returned. According to the Fed study, 3 of every 1,000 checks were returned unpaid in 2012.

This amounts to nearly 66.4 million checks with a value of $83.1 billion unpaid. Checks are returned unpaid for a host of reasons, but the most common is the payer did not have sufficient funds.

And although check usage is indeed declining, the study concluded that billions of checks will continue to be written well into the future.

Here are 10 good ways to more safely accept checks.

  1. Establish a check acceptance policy with acceptable forms of ID and a firm dollar limit. Don’t make exceptions!
  2. Verify check information. The check writer’s name, address and phone number should be pre-printed on the check.
  3. Ensure the check writer signs the check. If the name is not readable, have the customer print the name below.
  4. Compare signatures, photo and physical description from the ID with that of the check writer. Always get a photo ID with every check written, too.
  5. Most returned checks have low check numbers (100 to 500), which indicates a new account and therefore a more likely risk. Accept starter checks only from known customers. Consider any number below 300 to be a risk.
  6. Other useful information on a check includes the account opening date (month and year), usually indicated by four numbers to the side of the account holder’s name and address.
  7. Never accept checks with post office boxes. Always get a street address.
  8. Do not accept altered checks. The check writer’s name, address and phone number should be imprinted on the check.
  9. Do not accept third party checks. The check holder may not have permission from the account holder to use the check or it may simply be stolen.
  10. Have a camera at the point of sale. Individuals committing forgery and fraud don’t want their photo taken. A camera conspicuously placed will deter many dishonest people.

In the end, accepting checks is a balance between allowing your customers to use their preferred payment method while taking the prudent and necessary precautions to effectively protect your financial interests.

— Article by Money Transfer Systems, Inc. and checXchange Mobile. Used with permission. checXchange Mobile is a free mobile app that allows business owners to utilize a smart device to securely send any bounced checks to a center for recovery.


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