Millions of people use checks as a convenient form of payment everyday. According to D & B Company, in 1997 (the last year for which statistics are available) it is estimated that American consumers and businesses wrote approximately 66 billion checks. This figure amounts to roughly 250 checks per capita annually, or one check per business day per U.S. resident. D&B Company continues that despite the rapidly expanding use of electronic payment such as debit, the market share of checks remains quite high at 73 percent, measured as a percentage of non-cash retail transaction volume.
Checks provide a person access to their money without the hassle of carrying large sums of cash. Big ticket items such as appliances and furniture can be easily tracked and documented by checks in case problems arise, whereas cash cannot. It is good practice to write checks based upon a positive checking account balance to avoid a check being returned. Businesses as well as individuals suffer from being issued a check that has been dishonored by a bank due to non-sufficient funds, a bad check.
Bad check writing can be costly to issuers as they incur fees from their bank and from the person who received the check, plus the cost of the goods or services they accepted in exchange for the check. Signs that declare “We no longer accept checks” are the result of businesses receiving several bad checks over time, and opting not to accept checks as a form of payment at all.
Financial institutions offer overdraft protection to consumers as a way to avoid bouncing checks. If an account falls short of the amount a check is written for, your bank will simply draft the shortfall from a savings account, credit card or line of credit. Maintaining a higher checking account balance coupled with a disciplined checks and balancing system can help a person avoid bad checks. ChexSystems warns consumers to avoid relying on the “float” period (the time between the deposit of a check and its clearance at a bank). People are also advised to only write a check based upon what they truly have in a checking account.
Based upon individual state laws, businesses as well as individuals have the right to recover bad checks through civil or criminal action that can result in fines and imprisonment for the issuer. Bad checks can prevent a person from writing checks and opening a checking account. Businesses rely on risk reporting provided by verification companies like TeleCheck and ChexSystems, which alerts them to not accept a check written based upon a negative check writing history. Overdrafts, unsatisfied balances, fraudulent deposits and account irregularities overall are tracked and reported. According to Telecheck, “We provide the TeleCheck Electronic Check Acceptance service so that businesses have the opportunity for increased efficiency, reduced risk and higher productivity, all of which eventually benefit you—the consumer”.
According to CheckSystems, they are similar to Equifax, Experian and TransUnion. In fact, ChexSystems is regulated under the Fair Credit Reporting Act just like credit reporting companies. Bad checks can affect your credit score negatively. Credit bureaus will eventually receive reports of checks that are in collections and remain unpaid. Overall, bad checks should be avoided by consumers. Overdraft protection services and check book balancing can combat bad check writing. As mentioned bad check writing is costly for everyone involved in a transaction that can result in hefty fees and imprisonment.
Tamara Thompson has been an Internet content writer for over 10 years. Her work includes copy for email campaigns, articles and sales advertisements. Tamara is a gradute of Savannah College of Art & Design. Blog: A Girl Who Wears Glasses Article Source:http://www.articlesbase.com/banking-articles/bad-checks-can-negatively-impact-your-credit-1370209.html
