Bad Checks

A check is not cash, but an "IOU" or promise that cash will be paid upon presentation of the check at the writer's bank. A check is bad when it cannot be redeemed for cash.

Establishing a Check-Cashing Policy
Establish a firm check-cashing policy and post it where it can be easily read by customers and referred to by employees. This policy should specify your acceptance criteria concerning the following information:
  • Amount of check
    • Limit the amount for which a check may be written or limit it to the amount of purchase
    • Require management approval for any check written in excess of a set dollar amount.
  • 2-Party Checks
    • 2-party checks have a higher incidence of unreliability and can be more difficult to collect.
  • Local vs. Out-of-State Checks
    • Local check writers are easier to contact for collection. North Carolina courts cannot prosecute out-of-state check writers unless they can be contacted within our state.
  • Identification
    • The primary identification for collection purposes is a driver's license or special identification card issued by the state.
  • Other Limits
    • Specify any other limits so they will be clearly understood by customers and employees.
Returned Check Fee
Collect a returned check processing fee of up to $20. All checks should accurately reflect the following information:
  • Name
  • Address (mailing and physical)
  • Driver's license or valid identification number
  • Home and work phone numbers of the check writer
Things to Consider
If this information is not accurately recorded on the check, the employee should write it clearly on the check. The following items should also be considered when accepting a check:
  • Be sure the name, picture (or description), and signature match the check writer's identification.
  • Ensure that the written and numerical amounts agree.
  • Verify the correct date (not postdated).
  • Look for any erasures, alterations, or abnormalities.
  • Low check numbers can indicate a new account and can be less reliable.
  • Use extra caution when accepting an out-of-state check. The writer should be a North Carolina resident in case he needs to be contacted for collection.