Everyone knows how to write a check…ok, well not everyone, but I bet the majority of our readers do. So, for this post, let’s assume you know how to write a check. What most people don’t know is that there are five points on a check that make it negotiable. If any one of the five are missing, then the check can be refused. It always seems to get people when we bring it up to them at the credit union, they just don’t seem to understand why, so I figured it would make a good post. The following are in no particular order.

# 1 – Date

This particular point of negotiability seems to throw people the most. For some reason, people don’t understand that post- and stale-dated checks are not negotiable instruments. So, let me explain what that means.

A post-dated check is a check that someone has given you with a future date on it. Their intent was that you wait until that time to cash it or deposit it in your bank. However, while some banks have started accepting the check for deposit, many are still refusing them because of the date. Since the check is a promise to pay, or a contract between you and the person you wrote the check to, the future date makes it non-negotiable until that date arrives. Keep in mind that while some banks will accept the check for deposit, the issuing bank could reject it and send it back unpaid.

A stale-dated check is one where the date is six months in the past. After six months, most checks are no longer negotiable, unless stated on the check, Some say void after three months, some say void after a year. In those cases, we defer to what the check says. However, in most cases the general rule is six months. Now, in some cases your bank may take the deposit because of their relationship with you; however, the same rule applies as with post-dated checks, the issuing bank can return it unpaid for a stale-date.

When dealing with checks, it’s best to make sure the date is current and that you don’t hold onto the check for a long period of time.

# 2 – Words of Negotiability

This is referring to the part of the check that says, “Pay to the order of.” This is present on about 99% of checks. The other one percent has some variation of this phrasing, but what usually differs is that the terms “or bearer” are thrown in.

If there is any other phrasing, you may want to check with your bank about the validity of the check. I’m not saying that it could be fraudulent, but most checks say ‘pat to the order of.’

# 3 -  Payee

This is how it works. The check is made payable to a person(s) or a company and only those individuals have the right to negotiate that instrument. So, let’s say that you’ve got a check made payable to yourself. Simply endorse the check and then deposit, cash, or whatever your plans are for those funds. Let’s say the check is made payable to you and another person with the word ‘and’ separating your names. This gets more involved because now this check is the property of both parties, therefore both parties must sign the check.

With personal checks, most banks will just stamp the check for the joint owner if it’s being deposited. However, government checks and insurance checks do not allow the bank stamp. They must be signed by all parties on the check. This is especially important when you’ve got a check made payable to yourself and a business – a good example are the insurance checks you receive when you file a claim. Those are made to you and whomever holds your mortgage or auto loan. The bank holding your note has to sign the check before your bank can negotiate it. Sometimes it’s a hassle because you have to mail it to your lender and then wait for it to come back; however, the lender is part owner of that check and they must sign it in order for you to use the funds.

So, moral of the story here, make sure you pay attention to who the check is made payable to and have all parties endorse the check.

# 4 – Amount Certain

This refers to the amount of the check. There are two places on the check where we in the banking industry look to verify amount. There is the box to the right of the payee’s name, which we call the numbered amount. Then there is the line underneath the payee where the amount is written out in words. If there is a discrepancy between these two numbers, we go with the written amount as it is the legal tender. If that is unacceptable to you, then you would have to take it up with the person who wrote you the check.

# 5 – Signature

This really should go without saying, but all checks presented to the bank must be signed. If there is no signature on the front, it’s not valid. The only time not having a signature on the front of the check is acceptable is when you receive the online bill pay checks that state a signature is on file. But, if you’re just walking into the bank to make a deposit, the likelihood that you’ll have one of those checks is rare – unless you’re a business. So, always make sure the person handing you the check has signed it.

And that’s pretty much all there is to the checks. On a few of these points the bank can make an exceptions, but some of them there are no exceptions to be given. If you have a question regarding your checks, the best thing to do is take the check to the bank and ask. Most tellers can’t give you any information specific to your check without seeing it. They can give you a general idea, but if you want to know for sure, just take it in.

What questions do you have regarding checks and the five points of negotiability? Have you had a situation where a teller has refused one of your checks because of this?

Photo by Pulpolux

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