Checks are an important part of the U.S. economy. In 2012, 18.3 billion paper checks were issued, representing 15% of all non-cash payments for that year.
While writing a check is quite simple, cashing a check can sometimes be a nightmare. Review some of the top reasons why a bank won't cash your check.
You Don't Have Proper ID
Banks have to protect themselves against check fraud. Without proper proof of identity, banks can legally refuse to cash a check made to your name.
In some states, banks are allowed to swipe the magnetic stripe of your driver's license or identification card issued by the department of motor vehicles as a requirement to cash a check as long as they stay within the legal limitations of what they can do with that information.
Always carry proper government-issued identification, such as a drivers license or passport, when you intend to cash a check.
The Check Is Made to a Business Name
John Smith owns John Smith Landscaping Services LLC. His business is booming, so much so that he has not been able to complete the registration of his limited liability company (LLC) with his state government.
John just finished a large job and receives a check made to John Smith Landscaping Services LLC. He tries to cash that check at a nearby bank, but the bank teller refuses to complete the transaction unless John can provide proof of valid business registration with the state.
To prevent such a scenario, owners of corporations, non-profit organizations, LLCs and partnerships should register their businesses with the appropriate state agencies and open their business accounts under the business names.
The Bank Branch Can't Handle a Large Transaction Without Prior Notice
Not all banks can handle large transactions without prior notice. Smaller branches of large national bank chains and credit unions may not have all the necessary cash on site to clear a very large check.
For example, a bank may have on a particular day only $50,000 available for customer transactions. Even when that bank has the necessary cash to clear a $50,000 check, it cannot just give away all of its cash to one customer and ask everybody else to come back another day.
When you have a check for a very large amount of money, call the manager of the bank branch you intend to visit in advance. The bank manager can advise if you need to go to a main branch of that bank chain, suggest another bank that can handle the large transaction or set an appointment for you to visit her bank branch.
The Check Is Too Old
Some checks carry notices indicating that they will become void within 60 days or 90 days. While the Federal Reserve considers those notices to be guidelines, some banks are very conservative and are not willing to budge.
If you wait too long to cash a check and it is over 60 to 90 days old, a bank can refuse to cash it. Legally, a bank can refuse to cash any check that is older than six months. Some banks may decide to cash it anyway as a favor to long-time customers, but that is entirely up to the discretion of those banks.
Another reason why a bank may not be able to cash a check that is too old is that the routing number of the institution issuing the check may have changed as a result of merger or acquisition.
Hold Payment Request on a Post-Dated Check
If you try to cash a post-dated check and a bank refuses to cash it, the bank may be following the orders from the person that wrote the check.
When you give advanced written notice to your bank to not cash a post-dated check, the request is valid for six months, under state law. An oral notice is only valid for 14 days. To avoid any damages, banks will follow these requests from their clients very strictly.
Any time that you receive a post-dated check, ask the person writing it the initial date on which you can safely cash it.
The Bottom Line
Learn the top obstacles to cashing a check and take action to prevent a potential cash flow gap. While it may look like a no-brainer to grab a check and try to cash it right away, you need to be on the lookout for red flags that tell you that a check will be hard to cash.