A check is a common form of payment used when purchasing goods or paying for service received. The entity that acquires the check would usually cash the bill at the bank, where they would receive the funds, either immediately or after a certain period, depending on the bank’s policy. However, if a check falls into the wrong hands, the payer needs to be proactive in cancelling the bill to ensure the funds are not withdrawn.

How to Cancel a Check

A payer who finds out their signed check is lost or stolen can take several steps to ensure the bill does not get cashed. First, the bank should be directed to put a stop payment on the check. The stop payment instructs the financial institution not to honour the bill if it has not already been processed. 

To stop payment on a check, the bank would need information such as the check number, amount of the bill, and the name of the individual or corporation to which the check was made out to. Official paperwork for the request will need to be submitted to the bank through mail or in person at a branch within 14 days of verbally or electronically requesting a check to be cancelled. If the bank does not receive written confirmation when the 14-day period elapses, the stop payment request will not be honoured.

When the bank has received all the necessary information to confirm the cancelled check, it will be flagged for six months, after which the stop payment expires. Most banks won’t cash a statement that is six months old; however, if the payer is still concerned about the possibility of the check being cashed, they can extend the stop payment for another six months.

Fees for Stop Payments

Banks usually charge a fee of up to $30.00 for cancelling a check. The cost can vary, depending on how the cancel request is made or the type of client the payer is. For example, some banks charge little to no fees if the request is made online, but a higher price may be charged if the request is made in person or through a customer service agent on the phone. Some banks will also set the check writers less if they hold certain accounts with the bank.

The fees charged may add up if more than one check is cancelled. Some banks may charge the same fee for each review, while others may have a flat fee for multiple tabs. The price will also be charged on renewals after the six-month stop payment order has expired. If the check amount is less than the stop payment cost, then cancelling the check might not be worth it.

An account holder who loses blank checks or has them stolen might consider closing the account from which the unauthorised reviews might be written. Putting a stop payment on each empty check number could mean paying a fee for each one, which would get expensive. Closing the account and opening a new one would most likely be more cost-effective.

Other financial vehicles of payment that can be cancelled include money orders and electronic payments. You cannot cancel a cashier’s check since the funds are guaranteed to be paid by the bank. Debit card transactions cannot be cancelled, but a chargeback can be requested from the financial institution that issued the card.

Be Alert

While cancelling a check can prevent the unauthorised withdrawal of funds from one’s account, a person who has had checks stolen must still endeavour to monitor their credit reports over the following months to avoid becoming a victim of identity theft. Many of the best credit monitoring services could be helpful in this endeavour, as they also offer identity protection tools and services.

Check Hold

What Is a Check Hold?

A check hold denotes the maximum number of days that a bank can legally hold the money from a deposited check. After the check hold period has expired, the bank must credit the funds to the party’s account making the deposit.

The check holding period is generally equal to the number of days it takes to check to go through the bank’s clearing cycle.

How Check Holds Work

The Expedited Funds Availability Act of 1987 (EFAA) mandated that local checks may be held for no more than two business days. After 2010, all statements in the United States were considered local. The two-day hold has been extended to five days as a reasonable limit for holding local checks. The Federal Reserve requires that a bank carry most checks before crediting the customer’s account for no longer than a “reasonable time,” which is regarded as two business days for a same-bank statement and up to six business days for one drawn on a different bank. Financial institutions may hold on-us items for one business day following the deposit. Many use the term EFAA Regulation interchangeably with (Reg) CC.

Banks may currently decide to place six types of holds on checks:

1. Any amount exceeding a $5,000 deposit may be held. This “remainder” must be made available within a reasonable time, usually two to five business days. Such deposits are considered large deposits.
2. Checks that are re-deposited may be held for a reasonable period; however, if a customer returns the bill due to a missing endorsement or because the statement was postdated, once the bank corrects the deficiency, it may not hold said check as redeposited.
3. Banks may hold checks from funds that are repeatedly overdrawn. The definition of magnified is if the account had a negative balance on six or more banking days during the most recent six month period, or if the account balance was unfavourable by $5,000 or more two times in the most recent six month period.
4. Suppose a bank has reasonable cause to doubt the collectibility of a check (e.g., doubtful collectibility). This can occur in some postdated statements, checks dated six months prior (or more), and checks that the paying institution deemed it will not honour. Banks must provide notice to customers of doubtful collectibility, including the specific reason.
5. A bank may hold checks deposited during emergency conditions (e.g., natural disasters or communications malfunctions) that would prohibit the bank from functioning with its normal processes. A bank may hold such checks until conditions permit them to provide the available funds.
6. Banks may hold deposits into accounts of new customers. New customers are defined as those who have opened stores for less than 30 days. Banks may choose an availability schedule for new customers.

Banks may not hold cash or electronic payments, direct deposit, money orders, Treasury checks; Federal Reserve Bank and Federal Home Loan checks, cashier’s, certified or teller’s checks, and state or local government checks, along with the first $5,000 of traditional bills that are not in question (next-day items). It’s also imperative that commercial banks disclose their hold policies to all account holders. If a customer requests it, the bank must provide its policy in written form.

How to Open a Joint Checking Account

Merging money is a big step for many couples. Here’s how to do it.

Opening a joint bank account is a big step for a lot of couples. For some, it happens when they move in together, get engaged, or get married. Other times, teams keep their finances separate and then later decide that they want to mingle their money. (And sometimes, even married couples choose to keep all of their accounts separate.)

For people who share expenses, it’s often easier and more practical to have at least some of their money in shared accounts, making it convenient to pay for joint expenses like housing, food, and other regular bills. While couples often share savings and investment accounts, a budget joint checking account can be an excellent place to start.

KEY TAKEAWAYS

• Couples, parents with teenagers, and adult children with aging parents can benefit from the conveniences of a joint checking account.
• Opening a joint account is similar to opening a personal statement and will require information from both partners.
• It may make sense to retain individual checking accounts, as well as sharing a joint checking account.

Who Should Open a Joint Checking Account?

Couples (whether married or not) who are in committed, long-term relationships are good candidates for joint accounts. You need to fully trust the person you open a joint statement with since each account holder has full access to the money held by the report. That means that either person could withdraw cash or even drain the performance and close it without the other person’s consent.

This equal access comes in handy during illness or other times of crisis; for example, if one of the account holders gets sick, the other can access funds, pay medical bills, and keep the household running. And if one person dies, the other will have continued access to those joint funds without needing to deal with a will, probate court, or lawyer, as long as the account has the right of survivorship.

Newly married couples managing money together aren’t the only people who will benefit from a joint account. Parents and teens and adult children caring for their aging parents may want to consider a joint checking account. The parent of a teenager can then monitor their child’s account activity and deposit money on their behalf. And caregivers of older or ill adults can easily access funds to pay for care.

How to Open a Joint Checking Account

Opening a joint checking account is very similar to opening an individual checking account. Select “joint account” when you fill out your application or, after you fill in one person’s information, choose to add a co-applicant.

Both people may need their Social Security number, birthdate, mailing address, photo ID, and information for the accounts you plan to use to fund your new account. Another option is to add one partner to the other partner’s existing account.

 In a joint bank account, each account holder is insured by the FDIC. That means the total insurance on the invoice is higher than it is in an individual account.

Things to Consider

Managing money as a couple requires clear communication and expectations. It’s important to discuss how you’ll need each deposit money into the account and use the money once it’s there, ideally before you open the account. Remember, each person can access joint funds and talk to the bank without notifying the other person. Additionally, any money in a joint account may become vulnerable if one person has unpaid debts, as creditors can, in some cases, go after money in the joint statement.3

Keeping Some Money Separate

Opening a joint checking account doesn’t mean you need to close your accounts. Many couples keep individual accounts for personal expenses and joint ones for household and other everyday expenses. In some cases, each partner contributes an equal sum to the performance each month. Or each person contributes a similar percentage of their take-home pay. Whichever path you choose, be sure to lay out the expectations for both deposits and withdrawals.

When Good People Write Bad Checks

If you’ve ever overdrawn your checking account, you know how painful those overdraft fees can be. How can you avoid paying exorbitant prices when you overspend? Banks offer a few types of overdraft protection that can keep you fee-free but don’t think they’re all created equal. Here’s what you need to know to make sure that your overdraft plan isn’t overblown.

KEY TAKEAWAYS

• Overdraft protection is a service your bank provides when your account dips below $0.
• A common form of overdraft protection is a revolving credit limit attached to your bank account.
• Other types of overdraft protection include linked accounts or overdraft lines of credit.

Protect Yourself

Overdrafts happen. You don’t have to be a deadbeat to write a check or buy something with a debit card only to find that you’re using the wrong account, your recent deposit hasn’t gone through yet, or you simply misjudged the amount of money in your checking account.

The best way to avoid overdraft fees is simple: Avoid overdrawing your account. These days, online banking has made avoiding overdrafts easier than ever. You can get an email or phone alert whenever you cross a low-balance threshold. You can then transfer funds before a pending transaction puts you below the $0 mark. If you’re not tech-savvy, an old check register helps to keep tabs on spending. 

If you do overdraw your account, there are steps to keep things from spiralling out of control.

What Is Overdraft Protection?

Overdraft protection is a service your bank provides that pays for things after your account goes below $0. Any checks you write against your budget won’t bounce, and your debit transactions will still go through. Overdraft protection began as discretion banks extended as a courtesy to preferred customers when they didn’t have enough funds to cover their transactions. This service eventually evolved into lucrative financial assistance offered to just about anyone.

Types of Overdraft Protection

The most common form of overdraft protection is based on your credit score. The bank runs a credit check to determine a reasonable credit limit. Like a credit card, the credit line is revolving. You can use any amount up to the limit. In essence, the facility is a short-term loan. If you dip below $0, you won’t need to worry about your mortgage payment bouncing because you wrote a big check to cover an unexpected dishwasher repair.

Like any credit product, overdraft protection is at the discretion of the bank. This means the bank can approve and cancel the service at any time. If you fail to repay the balance and continuously maintain a negative account, the bank may decide to close the credit line and collect the balance. In most cases, interest continues to accrue.

While overdraft protection can provide some peace of mind in an emergency, it’s important to remember that it is a fee-based service. Most banks charge you a regular monthly fee, and because it’s considered a short-term loan, they usually charge interest. Keep in mind; you are responsible for any negative balance, which means you have to bring the account current.

 Weigh out the benefits of having an overdraft versus the fees you’ll end up paying for using the service.

Linked Savings Accounts

There is a way to avoid overdraft fees and still give yourself worry-free banking. Talk to your bank about linking your checking and savings accounts together. When you overspend with your checking account, the bank will cover the shortfall from your connected savings account. This is often the best type of overdraft protection because you avoid paying high overdraft fees and interest.

Your savings account needs a decent balance for this to work. And although there aren’t any overdraft fees involved, you may incur a transfer or withdrawal fee every time it kicks in. These charges are relatively typical for savings accounts. It’s a good idea to check with your financial institution about its transfer procedures and fees.

Overdraft Line of Credit

A similar kind of protection is the overdraft line of credit. Instead of having a savings account linked to your checking account, the bank connects a line of credit or a credit card. The obvious downside to using an overdraft line of credit is the fact that you’re using credit to fuel your purchases. If the linked credit is a credit card, you can also count on paying the cash advance rate for the money you use. These facilities are not as popular, though.

Credit Score Implications

Overdraft protection can affect your credit score. If you have bounce protection and don’t bring your account back to good standing soon enough, you can bet your credit score will take a hit. If you use an overdraft line of credit or linked credit card, keep in mind the potential negative consequences of having that extra money on your card, especially if you have a tough time repaying the balance.

Criticism of Overdraft Protection

Overdraft protection is a very controversial financial product. That’s because banks can often skirt usury laws with overdraft fees, even though many people feel that overdraft protection is a loan. The Truth governs loans in the Lending Act (TILA) of 1968. But because overdraft protection is considered a fee-based service rather than a loan, it’s not covered. This means you could be paying a hefty premium for the right to overdraw your account. You’ll see that some kinds of overdraft protection services can be a lot like payday loans. So while you may be able to rely on it from time to time, it should be used as an insurance policy in emergency cases only and not for everyday use.

The Bottom Line

If you are hit with overdraft fees for linked-account or bounce protection, the easiest way to avoid having to pay is to call your bank and ask. If you’ve been a customer in good standing for a while and this is your first or second time overdrawing, it’s likely your bank will let you off the hook.

Of course, the best choice is not to overdraw your account, but this is not the most straightforward answer for many people. Overdraft protection is a massive moneymaker for banks these days, and they know it. If you will overdraw your account, it pays to have decided in advance which kind of overdraft protection is the most beneficial for you.