Checks

Checks

Post-Dated Checks

A post-dated check is a check that is given a future date. Rather than wait [and hope] that payment arrives, a seller may sometimes request or even require a post dated check and hold it for deposit until that date. A post-dated check is not usually covered in the bad check laws of the states.

There is nothing illegal, inappropriate, unlawful, unethical, unprofessional, or unconscionable about a creditor asking a customer to issue a post dated check, nor is there any reason a customer cannot issue one or a series of post dated checks to clear a past due balance.

There are several advantages to taking postdated checks in settlement of an account balance including these:

The fact that you are holding a check that will be presented to the bank for payment on a specific date places a burden on the debtor to have funds on deposit when the check is presented.
In the event that the check is dishonored and the customer is sued, the existence of the check makes it harder for the customer to argue that the debt was never owed.
Even if a post dated check is not honored when it is first presented, there is always the possibility that the check will clear at its second presentment, or that the creditor can tender the check to the debtor's bank on a collection basis.

There is a down side to accepting post dated checks. If a creditor accepts a post-dated check in exchange for merchandise or services, in many jurisdictions the seller is considered to have extended credit to the issuer of that check. As a result, the transaction is not considered as issuance of a "bad check" since the creditor released the merchandise or performed the service in reliance of the check writer's promise to pay at some later date rather than in reliance of the check's negotiability. Therefore, the protections offered to creditors under the various "bad check" laws may not apply.

Third-Party Checks

A third party check is a check not issued directly to the payee. For example, a third-party check might be issued to a customer, endorsed by a customer, and tendered as payment to a company for the customer's account. Many banks refuse third-party checks because they pose a significantly higher risk of being returned unpaid by the bank on which they are drawn.

Joint Checks

A joint check is a check that is issued to two payees. It is used primarily in construction lending and insurance drafts. For example, a check issued by an insurance company to repair a home damaged by fire might be issued to both the property owner and the contractor. As it requires the signatures of both payees, a joint check protects the property owner from payments to the contractor without work being completed. It also protects the contractor from the possibility that the homeowner might use the funds for another purpose.

Check Guarantee Services

Check guarantee services are businesses that authorize and guarantee the checks that a creditor receives from customers . Some examples are Cross Check, E-Z Check, and Insta-Check. If a check is returned unpaid by the issuer's bank, the check guarantee business is responsible for collecting on those return checks - and for paying the seller whether the guarantor is able to collect from the party issuing the check or not.

Check Collect Services

Check collect services are businesses that specialize in collecting returned checks. Most full-service collection agencies and collection attorneys offer check collection services. Some examples are Check Investigative Service, CMA Business Credit Services, National Check Recovery, and NSF Recovery Systems.

In addition, some local government agencies offer collection services for retailers. For example, many counties in California offer merchants the opportunity to present dishonored checks to a "District Attorneys' Check Restitution Program".

Check By Fax Services

Check by fax services are businesses that offer software and software support so that creditors may receive checks from their customers by fax, e-mail, or phone. Some examples are Checks by Fax, Draft-O-Matic, CheckMAN, and SoftQuest Office.