These days moving or transferring money has become increasingly more electronic through ACH
or Wires and the use of checks is becoming extinct. Occasionally you may still receive a check in hand.
The method to clear a check involves moving money from the check writer’s bank account to your bank account. Once this process is complete, it should be safe to spend the money. Even today with as fast as transfers can happen, the check process takes time, and a check might still bounce after you deposit it, even if your bank allows you to withdraw cash from that deposit.
Did that check Really Clear?
Unfortunately, the term “released” or “cleared” sometimes gets used too soon. A check has only cleared after your bank receives funds from the check writer’s bank. Your bank’s computer systems might show that you have those funds available for withdrawal, but that doesn't necessarily mean you can spend the money risk-free. Most of the time, this informal terminology is fine, because funds typically arrive as expected.
Generally, the confusion around checks is derived from bank policies and federal laws that allow you to have some access to money before a check clears. Banks are required to make a portion of your deposit available promptly— such as freeing up the first $225. The remaining funds will be released after several business days. That policy however might prematurely provide access to the money, but it does not mean the funds successfully arrived from the check writer’s bank.
What if You Spend the Money?
If a check you deposited does bounce, the bank reverses the deposit from your account; regardless if you spent some or all of the money from that deposit. If you don't have enough money in your account to cover the reversal, you end up with a negative account balance, which means you will start bouncing other payments and incurring additional fees. Ultimately, you are responsible for deposits you make to your account, and you are the one at risk. To get your money back, you may have to go after whoever gave you the bad check.
Here are some ways to avoid getting ripped off. First, wait a longer time to spend the money, increasing your chances that the check is valid. In many cases, a few weeks to a month is more than enough time to wait. Most checks from banks within the United States should clear or bounce, within a few business days, but exceptions are possible.
Another example of a problem that could come up is if the check is fraudulent, and it was stolen from someone else's legitimate bank account. For example, a thief could pay you with a stolen check and the check might clear initially, but once the fraudulent payment comes to light, you may eventually lose that money.
In most cases, it’s difficult or impossible to track down the person who intentionally paid with a bad check. But if it was an honest mistake, you might be able to resolve the situation simply by asking for another payment.
If you don’t know the person you’re dealing with, consider other forms of payment such as cash or a legitimate payment processor instead. Just be mindful of scams on those networks, as well. Be especially careful in the following situations:
- A check received from somebody you don’t know
- A check Written for more than the requested sum
- A sender wants you to return excess money or send it to another business associate
- A check is from a foreign bank or otherwise suspicious entity
- A check came from somebody who is not local
When in doubt, you can always call the bank that the check is drawn on to see if you can get any information about the check. Ask them if it has cleared. Don’t call the number printed on a check, since it may go to a scammer. Instead, look up the bank’s phone number on the bank's official website.
Tips To Protect Yourself From Being Scammed
If you are sending money to someone else, then confirm their identity and why you are transferring money. Many scams involve electronically transferring or wiring money.
- For example, you shouldn’t send money to a family member in distress unless you have spoken to them and can confirm their identity. If you are elderly and don’t hear that well, then ask another person to speak to your family member. Create a code word for family members to use to confirm their identity.
- Never send money or gift cards to someone claiming to be with the IRS, police department or utility company. They never ask that you pay in this way.
- Avoid sending money to people you have only met online, no matter how close you feel to them. This is a common scam.
- Don’t give out your account information to someone you don’t know. They can use that information to access your bank account. If someone asks for your routing and account numbers, say "No."
- Don’t pay for goods or services by transferring money directly into someone’s bank account. Instead, insist on paying with a credit card or with PayPal.
Send Funds Using an ACH Transfer (Account to Account - A2A)
You can send funds electronically using an Automated Clearing House (ACH) transfer. With a credit transfer, you send money from one account to another. You can set up an Account-to-Account (A2A) transfer online, through Virtual Branch.
- Get the recipient bank’s routing number and account number, which you can find on a check.
- You must link the accounts. In Virtual Branch, Click the Pay Bills tab, then the Transfer Money tab. Under Transfer Money With Other Financial Institutions click "add an account."
- Complete the form with the required information
- Test deposits will be sent to verify the added account
- After the accounts are linked, you can send the money to the other account. The transfer must be processed by the next business day.
- There is a small fee for sending money this way.
Receive Funds Using a Debit ACH Transfer
A debit transaction is another type of ACH transfer. With a debit transaction, you request (or "pull") money from another account. This type of transaction typically takes longer because the bank pulling the funds doesn’t know if the other bank has sufficient funds to cover the transfer. As with a credit transfer, you can schedule a debit transfer online.
- Go to the bank account that you want to receive the money. Link up the account with the account that has the funds.
- Request the money. This type of transaction can take up to two or more business days.