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JR Brown
08-15-2014, 03:10 PM
In the What If? column Expensive Shoebox (http://what-if.xkcd.com/108/), Randall Munroe suggests that the most valuable object that would fit in a shoebox is possibly a check for an arbitrarily large amount. Theoretically, I believe there is no legal limit on the amount of money that can be transferred by check, at least in the US. But I assume that in practice banks have some restrictions on the value of checks they will accept.

So what is the maximum dollar amount of a standard, handwritten personal check (not a cashier's check or similar), drawn on a personal checking account and deposited in the usual way, that the average US bank will typically honor? If I just bought Rhode Island for one trillion dollars, and want to pay by check, will the transaction go through (assuming the seller accepts the check and I actually have one trillion dollars in my checking account)?

Exapno Mapcase
08-15-2014, 03:12 PM
Why wouldn't it?

Sicks Ate
08-15-2014, 03:13 PM
To start with a question-within-a-question...is there a limit to the size a checking account may be in the first place?

I know that above a certain amount (250,000?) funds aren't insured by the FDIC, so it would be unwise to maintain a higher balance.

Procrustus
08-15-2014, 03:19 PM
To start with a question-within-a-question...is there a limit to the size a checking account may be in the first place?

I know that above a certain amount (250,000?) funds aren't insured by the FDIC, so it would be unwise to maintain a higher balance.

There may be a limit, but it's far above $250,000.

Doctor Jackson
08-15-2014, 03:22 PM
There is no legal upper limit on a personal check, nor any bank imposed limit that I have ever heard of, but praticality usually dictates that very large amounts of money be transferred electronically - wire transfer is the most common method. During my time in banking I saw more than one 7 figure personal check be deposited. I saw wire transfers in the 9 figure range.

So long as the bank makes damn sure the signature and endorsement(s) are valid and puts a hold on the funds until the check clears, they are at virtually zero risk of loss.

Sicks Ate
08-15-2014, 03:22 PM
nm

Saint Cad
08-15-2014, 04:22 PM
One cent under $100 million or $99,999,999.99 according to this (http://www.bankingquestions.com/checksyoureceived/q_limitfunds.html). $9B according to this (http://www.celebritynetworth.com/articles/entertainment-articles/biggest-check-written/).

Dewey Finn
08-15-2014, 04:33 PM
Your second example, of a nine-billion-dollar check, was written by one bank and given to another bank. I doubt that qualifies as a "personal check."

Exapno Mapcase
08-15-2014, 05:10 PM
And all the first cite says is that the automated system has a limit. That doesn't imply that a larger check couldn't be pushed through manually.

usedtobe
08-15-2014, 05:19 PM
It depends on the amount and the history of the account.

Presumably Bill Gates could write a check for $500K and it would be "ho-hum, Bill's got a new toy" at the bank.

If however, your account is 10 years old and the only checks every run through are mortgage, utility, and trivial retail transactions, and you write one for $10,000 - expect a phone call to the number they have on record for your account. I got one of those calls over a $8000 check to a guy a hundred miles away (pre-web) on a boring household account.

If you do something cute, like change address and phone 2 days before putting through a check 100x the largest ever seen, a good bank shold do a bit more, but I have no idea what. Their contract may have fine print that lets them demand you personally present yourself and confirm, or maybe just flat-out refuse to honor (but the wording had damned well be VERY good to protect themselves if they dishonor a check with sufficient funds - it may be your bail money from Central American hellhole (brought to you by the USMC).

Ranger Jeff
08-15-2014, 06:19 PM
I suspect there's a difference between depositing a check for a large amount and cashing a check for a large pocketful of cash.

How is depositing a check all that different from a wire transfer, anyway?

CalMeacham
08-15-2014, 07:26 PM
I don't know what the limit is, but a friend once showed me the check he had written for a million dollars (for purchasing a house). It was a standard handwritten check on a check form from his standard bank checkbook, and it was honored.

dracoi
08-15-2014, 07:27 PM
Most banks will handle this situation by selectively freeing up funds. Every bank has their own policy, but an example might be: you can withdraw up to $1,000 of the deposit immediately, $5,000 within three days and $10,000 within a week, and the remainder only after it absolutely, without doubt, has cleared the other bank. If the check bounces, they'll still want their money back, but policies like this mean that they can control their risk a little bit.

Also, if we're talking millions of dollars, it's not likely the bank has that much sitting in the cash drawer.

As others have pointed out, though, there's no real limitation to how large the check can be and have a bank still honor it.

usedtobe
08-15-2014, 08:25 PM
Trivia time: Which 19th century "Robber Baron" was noted for writing "Pay Joe Blow $200" on a scrap of paper, signing it, and it was as good as gold - no banker in town would dishonor it?

Habeed
08-15-2014, 11:06 PM
Trivia time: Which 19th century "Robber Baron" was noted for writing "Pay Joe Blow $200" on a scrap of paper, signing it, and it was as good as gold - no banker in town would dishonor it?

Never mind the kind of paper the note was on, how could the banks verify legitimacy? That's what the whole check business is about. It's a scrap of paper with the account numbers baked in so you don't mess them up writing them by hand, and various countermeasures to make it tough to copy.

Since the robber baron is so well known, bank clerks won't have any trouble figuring out what account to debit - they probably have the numbers memorized. The problem is that the clerks still need to verify the document is authentic before they hand over the money.

Sunspace
08-15-2014, 11:16 PM
Here's a related question... Say I write you a cheque for $100 million. You deposit it. Unfortunately, my account is a little short that week and the cheque bounces. Two days later, the $100 million is yanked back out of your account and you get charged a fee. Ignoring anything that happens to me, do you get to keep the interest that the $100 million earned in those two days?

usedtobe
08-16-2014, 12:18 AM
Here's a related question... Say I write you a cheque for $100 million. You deposit it. Unfortunately, my account is a little short that week and the cheque bounces. Two days later, the $100 million is yanked back out of your account and you get charged a fee. Ignoring anything that happens to me, do you get to keep the interest that the $100 million earned in those two days?
Unless it is customary for me to get cheques for hundreds of millions, there is no way in hell I will ever see a cent of it.
Banks can and do hold funds until the cheque (I like that spelling!) is honored by the originating bank.
My bank will do so for 5 days on a suspicious deposit, but I believe (US) regs allow reversal for somewhat longer.

You want a fool's errand? Find out exactly what makes a check (but not that much) a check? I did programming for banks for 20 years and never was trusted with that OR the contents on the mag stripe on a card.
There was a case years ago of a guy receiving a come-on for some get-rich-quick scheme. Among the bits of paper was a "check" for $90-some MILLION dollars as a "sample of the kind of money you could be making". He deposited it and held his breath. They didn't catch it in the allotted time. It was his. Of course the bank did eventually catch on and made very unpleasant noises. It ended with him returning the money with an explanation of "deposited by mistake" and the bank signed a note saying they believed it was a mistake and would hold him harmless.
He make a few bucks on the Inspirational Speaker circuit.

Someone at the bank explained that the document had the NINE markers which make a piece of paper a check.
Name all nine.

UDS
08-16-2014, 01:44 AM
Never mind the kind of paper the note was on, how could the banks verify legitimacy? That's what the whole check business is about. It's a scrap of paper with the account numbers baked in so you don't mess them up writing them by hand, and various countermeasures to make it tough to copy.

Since the robber baron is so well known, bank clerks won't have any trouble figuring out what account to debit - they probably have the numbers memorized. The problem is that the clerks still need to verify the document is authentic before they hand over the money.
The magnetic-ink numbers are largely irrelevant to the question of authenticity. You can have all the magnetic-ink numbers embossed on the cheque form that you like, but if the signature is not the signature of the customer the cheque is a forgery. Conversely, if you have a payment order genuinely signed by the customer, that's authentic, even if it's written on the back of a paper napkin.

In most cases, there is no law that says that a cheque has to be written on a preprinted form supplied by the bank. It's highly convenient for the bank if the customer does use the preprinted form, and in most cases it's a term of your contract with the bank that if you don't use that form the bank won't process the cheque, or reserves the right not to process the cheque, or to charge you an eye-watering fee for processing the cheque. But that's not so much for security - use of a form that the bank expects to be used does little to prove authenticity - but for convenience - machine-readable account numbers and sorting codes, standard paper size, etc, etc.

Back in the day, before magnetic ink and before account numbers were such a big think and when clerical labour was cheap, preprinted cheques identified the bank but, typically, not the branch or the customer or the account number; the customer wrote these in when he filled out the cheque and, e.g., gentlemen's clubs would keep a stock of blank cheques from all the principal banks for the convenience of their members. And it wasn't that uncommon, if there wasn't a chequebook handy, to write a cheque on your own headed notepaper, or on blank paper. The main issue facing the bank when presented with a cheque was the same in all cases - is this really our customer's signature? - and while cheques on blank paper might be a bit slower to clear, because they required special handling, it wasn't a big deal. Certainly as late as the First World War, it was common for officers at the front who had run out of cheque forms to pay debts to one another, mess bills, etc, with cheques written on blank paper or on regimental paper. The cheques cleared without any great fuss.

septimus
08-16-2014, 02:42 AM
I remember an episode of Truth or Consequences circa 1960 when a contestant had to cash a check written on a watermelon! I see that Google remembers it also. (http://books.google.com//books?id=qbrq2ckE8gsC&pg=PA53&lpg=PA53)

Unrelated qustion: When I was young, I think 3rd-party or even 4th-party checks were not unusual. Now they're uncommon, no?

clairobscur
08-16-2014, 05:03 AM
There is no legal upper limit on a personal check, nor any bank imposed limit that I have ever heard of, but praticality usually dictates that very large amounts of money be transferred electronically - wire transfer is the most common method. .


At some point in my life, I handled payments made by various companies to my company. They were made by check, up to maybe 50-100 millions.

md2000
08-16-2014, 07:32 AM
An accountant where I used to work was caught embezzling once- the old "went on vacation" story. He used to work at a bank, and knew the policy was that any cheque over $50,000 had to be personally verified by the manager with the cheque writer. The accounting department was on summer shutdown, and the cheque run was skipped for one week - so the bank manager came in one day to find two cheques for $40,000 to the same obscure consulting company. He called the cheque issuing company to verify the validity of a pair of cheques totalling $80,000 and much hilarity ensues.

("I haven't heard of that company, I don't know what that cheque is for. It sounds like the sort of company Bob's department would deal with. Ask Bob. You did? He Doesn't know either?")

So no real limit so much as a cover-your-ass verification policy before letting money leave the bank.

I would suggest the limit is (a) only limited by the reputation and assets of the issuing company and (b) it makes no sense to have vast sums in a simple chequing account rather than things like term deposits and (c) when sending large sums of money, wire transfers make a lot more sense than "the cheque is in the mail".

Habeed
08-16-2014, 08:42 AM
You want a fool's errand? Find out exactly what makes a check (but not that much) a check? I did programming for banks for 20 years and never was trusted with that OR the contents on the mag stripe on a card.



Well, this seems to explain most of it : http://www.magtek.com/documentation/public/99800004-1.08.pdf

If you had a card reader/encoder device, like the ones they sell on ebay, you could probably work out the encoding yourself with a few example cards and gin up a card that was mostly valid, given the username/account number/expiration.

However, there are "cryptographic check digits" included. The thing is, I've read that hackers today do not need an image taken from a card reader. They can create a fake card that will swipe correctly with just the username/cardnumber/expiration data.

That's kind of odd, actually. Surely the bank could pass that data through an encryption algorithm and generate some unique check bits that would be unique to any given user (and very difficult for the hackers to predict). The credit card readers used in stores would pass those bits along to the bank for authorization but would not store the data.

Dewey Finn
08-16-2014, 10:25 AM
There was a case years ago of a guy receiving a come-on for some get-rich-quick scheme. Among the bits of paper was a "check" for $90-some MILLION dollars as a "sample of the kind of money you could be making". He deposited it and held his breath. They didn't catch it in the allotted time. It was his. Of course the bank did eventually catch on and made very unpleasant noises. It ended with him returning the money with an explanation of "deposited by mistake" and the bank signed a note saying they believed it was a mistake and would hold him harmless.
He make a few bucks on the Inspirational Speaker circuit.

Someone at the bank explained that the document had the NINE markers which make a piece of paper a check.
Name all nine.
You're overstating the amount of the check. It was for about $95,000. Here's his site (http://patrickcombs.com/95g/). Apparently, he's still an inspirational speaker.

watchwolf49
08-16-2014, 10:30 AM
I remember an episode of Truth or Consequences circa 1960 when a contestant had to cash a check written on a watermelon! I see that Google remembers it also. (http://books.google.com//books?id=qbrq2ckE8gsC&pg=PA53&lpg=PA53)

Unrelated qustion: When I was young, I think 3rd-party or even 4th-party checks were not unusual. Now they're uncommon, no?

Reminds me of a short movie back in the 1950s where a fella writes a cheque for $10 and gives it to someone, who in turn endorses it to someone else ... etc etc etc ... and the cheque winds up in the original writers hand with the back full of ten twelve endorsements. He just ripped it up and end of movie.

watchwolf49
08-16-2014, 10:34 AM
This is a little off-topic, but I once wrote a cheque for one cent ... $0.01 ... to a political campaign. Not only did they waste money depositing the cheque, I got on the mailing list and gobbled up at least ten bucks worth of postage from them. Good guess folks, it was a congressman !!!

Hari Seldon
08-16-2014, 10:36 AM
Here's a related question... Say I write you a cheque for $100 million. You deposit it. Unfortunately, my account is a little short that week and the cheque bounces. Two days later, the $100 million is yanked back out of your account and you get charged a fee. Ignoring anything that happens to me, do you get to keep the interest that the $100 million earned in those two days?

I can answer that, although this happened many years ago, probably 30 or more. I had a US$ account at a small bank somewhere in New England. I got it shortly after US banks had discovered the NOW (negotiable order of withdrawal) accounts that allowed them to get around the rule forbidding interest-bearing checking accounts.

A friend had a check for US$8000 that he was dubious about. It actually purported to be a certified check and I never did find out the whole story. So I sent it off to the bank, accompanied by a note saying that there was some doubt that the check was valid and I would make no attempt to use the money until it had cleared. Sure enough, I got a note from the bank a month later that it had been rejected. There was no penalty and I was astonished that I actually got a month's interest on the 8K. I returned the check to my friend explaining that I actually got the interest. He explained that that check had, until it bounced, increased the bank's capitalization by 8K and that they could lend more money based on that.

aceplace57
08-16-2014, 11:00 AM
I had a relative that wrecked her checking account by spending her inheritance check too quickly. Her mom had left her a small amount. It was around 10k and the lawyers sent her a check after she turned 21. She deposited it and went on a spending spree the next day. I never did learn what she bought. I know she bought a washer/dryer and some furniture. She shopped at several stores. Every check bounced.

Young and dumb for sure. But it was a certified check issued by a large law firm. The bank still put a hold on the funds.

Donnerwetter
08-16-2014, 11:04 AM
The technicalities of paying large sums of money are fascinating. I watched a documentary about the sale and delivery of a newly manufactured Boeing airplane to a European airline. There were delegations from Boeing and from the airline sitting in a conference room. One executive was in constant contact with the bank and everybody was watching him. Once he received the confirmation that the payment had been made, the airline people (including pilots) were free to leave and to take the plane to Europe. I wonder if anybody really feared that there was even a slight risk/suspicion that the airline executives wouldn't pay up and take off (so to speak) with the plane.

Pork Rind
08-16-2014, 11:18 AM
Trivia time: Which 19th century "Robber Baron" was noted for writing "Pay Joe Blow $200" on a scrap of paper, signing it, and it was as good as gold - no banker in town would dishonor it?

That's not a very tough question. The robber baron's name is clearly Joe Blow. Says so right in your question.

Semi-related story. Back when I still had all my typesetting and printing equipment, I have a set of matrices for casting the MICR type. Also had the guidebook on how to verify that it was printed correctly, so in theory I could have letterpress printed my own checks. I had planned to do that for a while and then idea just faded. I now write about five checks a year, so the level of effort compared to the novelty factor was too high.

Randy Seltzer
08-16-2014, 12:09 PM
To start with a question-within-a-question...is there a limit to the size a checking account may be in the first place?

I know that above a certain amount (250,000?) funds aren't insured by the FDIC, so it would be unwise to maintain a higher balance.

There may be a limit, but it's far above $250,000.Sicks Ate is correct. FDIC currently insures individual depositors up to $250,000. cite (https://www.fdic.gov/deposit/deposits/)

Note that this is not an account limit. You can deposit as much as you want into a checking account (subject to the concerns expressed elsewhere in the thread). Any amounts over $250k won't be covered by FDIC though.

I was a bank teller back in the '90s when the limit was only $100k (it switched in 2008). We had customers who were extremely concerned about FDIC insurance who would buy long-term CDs for $100k, and have checks cut to them every month so that the interest wouldn't put them over the FDIC limit. Other customers though, didn't care about FDIC insurance and would have $200-300k in a saving account. (Side note: in retrospect, who was buying 5.5% CDs for $100k back in the late '90s? Crazy people, that's who.)

md2000
08-16-2014, 12:52 PM
Sicks Ate is correct. FDIC currently insures individual depositors up to $250,000. cite (https://www.fdic.gov/deposit/deposits/)

Note that this is not an account limit. You can deposit as much as you want into a checking account (subject to the concerns expressed elsewhere in the thread). Any amounts over $250k won't be covered by FDIC though.

I was a bank teller back in the '90s when the limit was only $100k (it switched in 2008). We had customers who were extremely concerned about FDIC insurance who would buy long-term CDs for $100k, and have checks cut to them every month so that the interest wouldn't put them over the FDIC limit. Other customers though, didn't care about FDIC insurance and would have $200-300k in a saving account. (Side note: in retrospect, who was buying 5.5% CDs for $100k back in the late '90s? Crazy people, that's who.)

That's the other point. Who keeps a vast amount of money in a low-interest chequing account? I suppose that opens up a whole new discussion thread about money management of the rich and famous, or large corporations - at a certain point there's enough money to be made that it's profitable to hire someone (or some company) to shift your assets around so they generate decent income, but also free themselves up in sufficient quantity to pay the day-to-day bills.

I suppose the real upper limit is - what's the biggest number the bank computer system can process?

thelurkinghorror
08-16-2014, 01:16 PM
Most banks will handle this situation by selectively freeing up funds. Every bank has their own policy, but an example might be: you can withdraw up to $1,000 of the deposit immediately, $5,000 within three days and $10,000 within a week, and the remainder only after it absolutely, without doubt, has cleared the other bank. If the check bounces, they'll still want their money back, but policies like this mean that they can control their risk a little bit.

Also, if we're talking millions of dollars, it's not likely the bank has that much sitting in the cash drawer.

As others have pointed out, though, there's no real limitation to how large the check can be and have a bank still honor it.
This, but not in that exact way. First, the time period/amount depends on if the bank is national/local, out of state, or even out of country, with more restrictions further on, but: the bank officer is given some leeway to make it more strict, but it isn't absolute. They can't pick a random date to hold it to, but may choose between releasing it sooner or later based upon the client's account history.

I don't remember the exact values, but they have to inform you in writing (receipt should have the info) the exact terms. $100 is freed up immediately/next day. Then $5000 (IIRC that means total, so the next $4900) within X days, the remainder further on. I don't think that there is another intermediate step, and whether the check is officially cleared or not is beyond the immediate bank officer's control. The computer makes the

FDIC is $250k, but I personally wouldn't be too concerned about BofA going into default/another Great Depression in one month!

Here's a related question... Say I write you a cheque for $100 million. You deposit it. Unfortunately, my account is a little short that week and the cheque bounces. Two days later, the $100 million is yanked back out of your account and you get charged a fee. Ignoring anything that happens to me, do you get to keep the interest that the $100 million earned in those two days?
No cite, but I think I've read: you won't see any interest. The fee will likely be the same as if the check were much smaller.
Unrelated qustion: When I was young, I think 3rd-party or even 4th-party checks were not unusual. Now they're uncommon, no?
Yes, pretty rare, at least at the consumer level, and banks have differing policy on how to treat them.

md2000
08-18-2014, 01:26 AM
The movie "Catch Me If You Can" was based on the real life story of a con man who actually pulled of some of those exploits. Recall one of the tricks in the movie is that he prints cheques with altered routing numbers. When they are deposited, the rudimentary computer clearing hosue system sends the cheques across country (despite what the face says), so there's a transit delay of several weeks before they bounce and are denied. By then he's long gone.

Doctor Jackson
08-18-2014, 08:27 AM
Sicks Ate is correct. FDIC currently insures individual depositors up to $250,000. cite (https://www.fdic.gov/deposit/deposits/)

We are getting a bit off track here, but a bank account can be FDIC insured for more than $250,000. The explaination lies in this sentence from your cite:
The standard insurance amount is $250,000 per depositor, per insured bank, for each account ownership category.
Underlining mine. The easiest example is a joint account. If my wife and I are joint owners of a checking account, we are each covered up to the FDIC maximum of $250,000, making the maximum insured account value $500,000.

One cite (http://www.bankrate.com/finance/savings/6-ways-to-insure-excess-deposits.aspx):

The FDIC allows you to insure significantly more than $250,000 if you're able to title accounts separately. For instance, you could have $250,000 covered in an individual account, $250,000 covered in a joint account, and $250,000 in a retirement account. For more information on titling see this article.

Through account titling one can protect well over $1 million in the same bank. Use multiple banks and the sky is the limit for FDIC protection.