In the age of the internet, online payments, debit cards, and credit cards have become a popular form of payment. However, there is still a a partial use for traditional check writing, and understanding how it works is an important life skill to know. A check is a written order to a bank, to pay a stated amount of money to the person or business named.
Benefits of Check Writing
Though checks have somewhat fallen out of style in recent years, there are still many benefits to using traditional checks:
Record keeping: Writing a check provides a tangible paper trail. This paper trail allows you to keep track of your payments, which can be useful for budgeting, tax purposes, and reconciling accounts. Checks also serve as proof of payment, which can be very helpful for any discrepancies or legal matters.
Security: Checks are much more secure than carrying large sums of cash. If a check is lost or stolen, you can typically stop payment on it to prevent unauthorized use, protecting your funds. This also makes checks must safer to send through the mail than cash.
Personalization: Checks allow you to include specific details, such as the recipient's name and purpose of payment, which can be helpful for both parties when keeping track of transactions.
Formality: Writing a check may add a level of formality to the transaction, especially for larger payments or official purposes. Some organizations or individuals may prefer checks for their perceived professionalism. In some cases, large payments such as the down payment on a car, require a certified check.
No need for technology: As we know, sometimes technology fails. Checks can still be a viable form of payment in situations where electronic payment options are unavailable or unreliable, such as in remote areas or during power outages.
Where Do I Get Checks?
Since checks are connected to your checking account, you must first open an account at a bank or credit union of your choice. You can stop into the physical bank location or even apply online. However, don't just pick the first one that comes to mind, make sure you do the appropriate research to decide which checking account is right for you.
Once you have opened a checking account, your bank will send you a checkbook full of checks. From there, you can write a check to an individual person or even to a business, and the money will be drawn directly from your checking account. Basically, you use a check just like you would a debit card.
Parts of a Check
Before learning how to write a check, we first need to explore the various parts of a check. Take a look at the sample check below. Each number matches up with its description.
Personal information: Provides details about the account owner (the person sending the money). After opening an account, your bank will send you a book of checks with this information printed.
Date: Serves as a timestamp
The check number: This number identifies which check in your book this is. This can be a security measure to identify each payment and prevent fraud. This number is also helpful for balancing a checkbook and keeping track of checks.
Payee line: Designates who can receive the money. This can be written to an individual, business, or organization.
Dollar box: Displays the value of the check in numerical format.
Written amount of the check: The value of the check written out using words instead of numbers.
Your bank’s contact information and logo: This is usually printed on the check and helps to identify the bank the money is coming from.
Memo line: A space for any notes about the purpose of the check. This can be helpful for organizational purposes.
Signature line: Verifies that the account owner has approved the payment. The check will not be processed without the signature.
Your bank's American Bankers Association (ABA) routing number: This tells the recipient where to find the funds for the check. You will need this number to set up direct deposit or automatic payments from your checking account.
Your account number: This number also lets the recipient know where the money for the check will come from. You will need this number to set up direct deposit or automatic payments from your checking account.
Your bank’s fractional ABA number: This contains the same information as the ABA in section 10, but it's often presented in another format in the upper right corner of the check.
A cool note; numbers along the bottom of the check are written in a specific font with a special ink. Known as "Magnetic Ink Character Recognition," or MICR, this allows checks to be easily read and processed by computers
How Do I Fill Out a Check?
Now that you know the parts of a check, it is time to learn to fill one out. One thing to note is that all checks should be written in blue or black ink. This is an important safety measure and prevents potential fraud.
Below are the steps to take to effectively fill out a check. It is easiest to start at the top and work your way down, making sure to fill out every piece of information.
Step 1: Fill out the Date
Enter today's date here.
Some people prefer to post-date checks, which means writing a date that occurs in the future. This may come in handy if you want to delay the transaction (maybe you are waiting for your next paycheck to clear). However, be careful with this, Banks generally have no obligation to adhere to the date written on the check and may process it as soon as they receive it. If you wish to do this, make sure you notify your bank.
Step 2: Complete the Payee Line
In this section, you specify who will receive funds from your checking account. Write the name of the person, business, or organization that you wish to pay (also known as the payee.)
Make sure you are using the recipient's full name. Avoid any nicknames or abbreviations as that may make cashing/depositing the check more challenging. Usually, an organization that requests a check will tell you exactly how to fill out this line ("Please make the check out to..." or "make the check payable to...")
A note about security:
Once this line is filled out, only the payee is allowed to deposit the check, cash it, or endorse it to someone else. This makes check writing very secure.
It is also possible to pay your check to the order of "Cash." In this situation, you just write the word "Cash" on the payee line instead of a name or organization. This can make it easier if you don't know who to make the check out to. However, this is risky because anybody can cash the check, not just your intended payee.
Step 3: Fill in the Dollar Box
In the dollar box, write the amount of your check in numerical format.
A note about security: It is fairly easy for someone to alter numbers on a check. To make your check as secure as possible you should:
Write the numbers as far to the left as possible.
Clearly enter a decimal and any numbers after the decimal.
Include ".00" for round dollar amounts.
Step 4: Fill in the Written Amount Line
For the written line, write the amount of your check using words
When writing out your amount, cents are written as a fraction over 100 (since there are 100 cents in a dollar). So for example, if you write a check for $20.99, you would write "Twenty and 99/100". If you wrote a check for $10 exactly, you would write "Ten and 00/100"
A note about security:
If there is space either before or after the amount you write out, you may want to strike through it with a single line in order to prevent anyone from altering the value of your check.
Since numbers are easier to alter than words, your written section is the legal amount the bank will use if there is a discrepancy.
Step 5: Memo Line
Use the memo line to record the purpose or any notes about the check. This line is strictly for you and your organization. It is unofficial and can be written informally or actually left blank entirely.
Even though this is optional, the memo line can be beneficial and may be used for the following reasons:
Add details for your personal recordkeeping.
Include an account, invoice, or transaction number for paying bills.
Add notes when you're writing checks to friends or family.
Step 6: Signature
The signature line is extremely important, as the check will not be processed without it. In this space, the payer signs their name, which indicates that they agree to pay what is written on the check.
Signing should be the last step of writing a check. Only complete this after you have double-checked all other sections. If you sign a blank check and lose track of it, whoever finds it can put whatever they want in those empty spaces.
A note about security:
When you opened your bank account, you most likely filled out a signature card. Your signature on the check can be compared to your signature on file at the bank in the case of fraud.
You may also find the letters "MP" next to the signature line. This marking stands for microprinting, which is an additional security feature that involved small printings that can only be viewed with special equipment.
Endorsing a Check Written to You
Now that you fill how to fill out a check, what happens when a check (or paycheck) is written to you?
An endorsement is a signature or instructions written on the back of a check. This is required in order to deposit or cash a check or paycheck.
In order to endorse a check, you will need to flip the check over to the back and turn it vertically to sign. Review the image below to see where the endorsement spot is located
There are three types of endorsements you can use
1. Blank endorsement – The signature of the payee is written on the back on the check. This type offers the least amount of security, though banks will authorize checks written like this.
2. Restrictive endorsement - The signature of the payee is written on the back, along with instructions in regards to the purpose of the check.
For example, many people write "For Deposit Only" or "Mobile Deposit Only" to let the bank know when this check is geared for. You could also write the specific account number the check will go to. This provides an additional layer of security, as the bank must follow your instructions.
3. Special Endorsment - This allows the payee to make the check payable to another person or organization.
For example, if John wants to make the check directly payable to an another entity, he would write “Pay to the order of..."in the endorsement area along with his signature.
Final Thoughts on Check Writing
As we move further into the digital age, electronic payment methods have gained popularity. However, checks continue to play a crucial role in many financial situations, such as paying bills, rent, or conducting business transactions. Therefore, having a good grasp of check writing still remains relevant and practical. Understanding the process of check writing is important for anyone who wants to navigate the financial world effectively and ensures accuracy and security in our financial transactions.
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