Keeping checking account in check

Review Your Checking Account to Avoid Costly Mistakes

Review Your Checking Account to Avoid Costly Mistakes

November 05, 2004|by Lynn Little

Consider how often you write checks, make deposits, use your debit card or make automated payments from your checking account, and you'll be reminded about how much you depend on these services from your bank. According to the Federal Reserve System, Americans write about 40 billion checks a year.

"Check 21," short for the Check Clearing for the 21st Century Act, a new law that took effect Oct. 28, will allow financial institutions to process "substitute checks," high-quality paper reproductions of both sides of original checks. Each substitute check will be created from an electronic image of an original paper check. Over time, Check 21 will make check processing faster, which will affect check writers and depositors.

It's more important than ever to avoid bouncing checks. A check deposited in a bank generally reaches the paying bank in about one or two days. As a result of Check 21, more checks will be processed electronically - and faster. That means you need to have enough money in your account when you write a check or run the risk of having checks bounce. You also might have less time to place a "stop payment" on a check you've written.


Check 21 is expected to reduce the instances in which original checks are returned with statements. As before, if you write a check to someone who is not an account holder at your bank, your original check will be deposited at another institution. The check then travels to your bank for payment. Under Check 21, a bank will have the option to create an electronic image of the check, produce a substitute check and send it to your bank. This option means your original canceled check is no longer available to you.

What if you must prove a disputed payment and your bank has given you a substitute canceled check, not your original canceled check? As long as the substitute check meets Check 21's standards, it would serve as legal proof of payment. Images of checks often are accepted as proof of payment by the IRS, courts and other parties, provided they meet certain requirements.

Bank security procedures cannot stop all frauds, which can involve printing or altering checks or obtaining account numbers used to arrange for "payments" from accounts. You can help by promptly reviewing your bank statement each month and immediately reporting any unauthorized transactions. You also can monitor your account more regularly online or through telephone banking programs at your bank. Timely notification of a problem can limit your potential liability, stop a fraud or assist in an investigation.

Protect your account information. For example, only give your checking account number, including the routing numbers at the bottom of your check, to businesses you know are reputable. Never provide checking or credit card information, Social Security numbers or other personal information in response to an unsolicited call or e-mail.

Be wary of offers to send money - perhaps to buy something you're selling or forward winnings you've supposedly won. If you're asked to accept a cashier's check for more than the amount due and wire the "excess" money back, the cashier's check could be counterfeit, and you would be responsible for the money you wired to the con artist.

Take safety precautions with your checks. Don't carry more checks than you expect to use, keep extra checks in a secure place, and contact your bank immediately if any of your checks are lost or stolen.

If you are not already doing so, consider direct deposit of your paycheck and other checks you may receive, as a way to prevent them from being lost, misplaced or stolen from your mailbox.

Review the checking account options your bank offers. Most banks have several types of checking accounts with different features, fees, yields, minimum amounts to open an account, and other characteristics tailored to different types of customers. Different banks offer different checking products, so do some comparisons. Checking accounts from another bank or even on the Internet might be more to your liking.

Start by evaluating your needs, perhaps with the help of a customer service representative at your bank. Ask yourself:

· How many checks do I write each month?

· Do I plan to pay most of my bills without checks, perhaps by phone or on the Internet?

· Do I use an ATM or a debit card regularly?

· How much of a balance do I plan to routinely keep in the account?

It is important to perform this kind of review every year or two. Perhaps you'll discover that your existing checking account is still right for you, or that switching to a different account (at your bank or elsewhere) could save you money or bring you a better value.

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