Smart About Money: Adventures in Check-Writing


I recently heard a story about a businessperson who discovered that the check a client had sent them had been intercepted somehow and cashed by a stranger in another state. This story had an odd twist.

When the businessperson reported that the check had never been received, the company that had written the intercepted check said that since their bank wouldn’t refund the money, they weren’t sending a new check because then they would have paid the same bill twice.

Hmmm … try telling that to the IRS. Or a credit card company.

And I was really surprised to hear that the company that wrote the check was having trouble getting their bank to get to the bottom of this fraud with the bank that cashed it.

If the check was deposited into an account, they know who that accountholder is. If, by chance, the check was cashed for cash, someone certainly seems to have dropped the ball when it came to confirming identification.

But this is the sort of things banks settle between themselves. The company and the person they paid should not be out that money.

What did that story bring home to me? That when it comes to your finances, when everything is going smoothly, it might not matter what bank you’re with. It’s when the chips are down – when something has gone wrong – that you want to be with a bank you know is ready, willing and able to go to bat for you.

And also, though checks have been around for a long time and they are still used a lot, there seems to be quite a number of misconceptions about how checks work.

A gentleman came in to my office one day to complain that a check he had post-dated cleared his account. But he didn’t know his check law. Post-dating does not prevent a check from being cashed. A bank doesn’t even have to look at the date on a check. Most banks don’t. Because the date line on a check is only there as a memo/convenience for the person writing it.

In fact, the only parts of a check that are legally binding are the name of the payee, the written amount of the check (not the ‘number’ amount!) and the signature of the account holder. Everything else is there as a courtesy.

Sometimes a person will sign a check over to a 3rd party. That is legal but banks don’t have to accept a 3rd party check and, increasingly, many don’t. If the money should go to you, the check should be made out to you. If someone wants to sign a check over to you, you may want to question why they are doing it that way and be aware that – even if the 3rd party check is genuine – you could possibly have trouble cashing it.

And then there was an individual who was in a dispute with a contractor and gave him a check to “get rid of him.” They came into the bank later that day to put a stop-payment on the check. Unfortunately, the contractor had already cashed it.

Even checks deposited into payees’ accounts are clearing almost instantaneously today in most cases. So a stop-payment is not the kind of tool it used to be.

(A stop-payment is still very useful when you are informed that a check has gone missing and you want to prevent that check from being cashed fraudulently.)

Nick Maffeo is the President & CEO of Canton Co-operative Bank in Canton. “Smart About Money” is a regular column he writes for the Canton Citizen. Have a financial question you’d like to ask? Email to


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