Last Thursday a client (I am self employed) gave me a check for $1,000. It was a counter check ( a blank check with the account owners’ name hand-written in the account owner field.)
The client’s bank was close to the job, so I thought I would just stop by there and cash it because I wasn’t sure my bank would accept it… Much kerfuffle and consternation and apologies and managers being called ensued, and the end result: They could not cash the check because they “could not verify it.” This was First Merit bank, if it matters. They advised me to go back to the client and get a non-counter check.
My own bank (Chase) was right up the road and I was sure the client hadn’t just written me an uncashable or bad check, so I went up to Chase and deposited it. No problem, funds immediately available, etc.
So, why was the client’s own bank so cagey about this check, and why did my bank accept it with no problem? Seems to me that if a check is somehow suspicious, the issuing bank would be the one able to sort it out, and a second-party bank would be the one to get nervous about it.`What am I not understanding, here?
Maybe it’s just because you’re a customer at your bank and not at his bank. They don’t have to please you, and they don’t have an easy way to hunt you down if things go South. Your bank has a relationship with you they want to maintain, and they assume since you’re a customer, they will be able to find you if they need you.
Of course, I have no expertise in Banking, just throwing out what might be behind this.
I thought about that, and actually when I go into my own branch, the regular cashiers know me and wave off my ID.
But Chase is still a giant mega-bank and they are surely not going to accept an iffy check just because a couple of cashiers know me. And I should nte that it’s not like I do millions of dollars worth of business with them, I am definitely small-fry. A check is either iffy or not-iffy. If the issuing bank, who presumably has some sort of fiscal relationship with their client (and they are, on the surface anyhow, very well-off) is going to get funny about a check, why would my bank, who presumably knows bupkiss about the check-writer, accept the thing without question?
Banks are in business and will not take chances that might hurt them financially, is what I am saying. So why one, but not the other?
Your own bank could put a hold on your funds until the check cleared, since you deposited it. The issuing bank could not, they could only hand you the cash and have no recourse if the check failed to clear for any reason.
Chase knows who you are. They know you’ve been with them for X years, have low overdrafts, have an average balance of $Y, and thus are unlikely to rip them off, or will make things right if the customer is ripping you off. The odds of a problem are low enough to assume a risk.
The other bank knows you are a guy with an ID that matches you and a secondary piece of ID. Both are not trivial but possible to fake. If it is a smaller check, they will cash it with minimum fuss, eating the loss if it is fraudulent. But $1000 too much. FWIW: my bank called the check maker if >=$1000. I don’t remember if counter checks were treated differently, but we would refuse it if the customer cannot be contacted. An exception is with things like cashier’s checks were issuance can be verified. Counter and personal checks cannot be verified by their original issuance.
The “known” ID verification puts the onus of risk on the teller. We were somewhat discouraged from using it unless someone higher up wished to allow it. Again they know that although you might get scammed, you are unlikely to be in that situation or be a scammer yourself. People don’t typically rip of banks after 20 years of having an account.
ETA: yes, Chase could hold it. They opted not (and/or the computer didn’t recommend it) due to the above. If a guy has about $300 in his account at any time, and gets a check for $68,000, there may be a hold on that no matter how long he’s been a customer. For a guy with millions that’s a typical transaction.
Maybe they tried to call the guy to okay it and he didn’t answer. Maybe that particular check didn’t look within that customer’s usual transactions, so they didn’t feel 100% on it. Maybe he was using counter checks because he almost never writes them, so there were no recent signatures to check against and his signature had changed since the signature card was made. Maybe the didn’t trust the memoposting on the account and weren’t sure about the funds. Bottom line, the drawee bank has no recourse against you–but your bank does.
Good point - why was he using these checks? Aside from him losing or running out of checks, it could also be because the account is brand new and checks are on order. A common enough situation, and there are plenty of legitimate reasons to pull $1000 out of a new account, but this is also a common method of fraud.
Banks will always more readily take a straight check deposit with no cash back without issue. They have recourse against you, the account holder, even if they don’t hold funds right away. They can still take the money back from your account if the check proves bad in days or weeks. Your history as a client also is a factor. If it was a new account, or an account with a history of bounced deposits, they likely would have held the funds for at least a couple days.
The other bank is seeing a check that you yourself could have written without the account owner knowing. Even if it was a printed check, they may have been absurdly cautious. Counter checks are kinda fishy even under the best of circumstances. If they hand you a grand in cash, they’re stuck if it turns out fraudulent.
As far as banks are concerned, straight deposits are always preferred.
A bit of tangent but First Merit is The WORST BANK EVER, EVER. Seriously. I made a holiday out of the day I left that God-forsaken institution (Jun 18).
Back in the early 70’s, I used to work summers at a small diving gear store that was across the road from a private yacht club and one day one I was with the owner of the store making a delivery and one of the wealthy members wrote us a check on a bar napkin. The owner of the store deposited it and it cleared without a hitch. Evidently the rich guy was known for hand writing checks.
Deposit slips also have a “cash back” section, so you can officially make a deposit but get a sizable sum back in cash. Technically, you could deposit $1000 and ask for $999 back. Obviously that doesn’t work with First Merit in this case or any bank you’re not a member of. However it is popular to cash a check, then immediately deposit all or most of the sum (in cash). This gets you access a whole day earlier. I’ve never been in a situation where that is necessary (and also credits before debits), but some felt it necessary. The branch I worked in decided to disallow this. It wasn’t very popular among customers, and it felt bad saying it. The more astute could ask to cash the check, then ask to deposit it without mentioning this fact at the start. But any deposit where the computer suggests a hold would also be cautioned against by the computer if it were to be cashed.
Never heard of them, but funny, because that’s my opinion of Chase. I just have a credit card with them but between that shitty website and the spam mailings I never liked them. “Worst” is a hyperbole? Almost certainly though.
Thanks; I hadn’t considered the fact that my bank has recourse if the check was bad; I had the funds to cover it if it was. As to why she wrote me a counter check, I haven’t a clue. Can’t remember the last time I’ve even seen one of those! I just thought it odd that a bank wouldn’t honor one of their own checks, while an unrelated bank accepted without question without a hold. (First Merit did try to call with account holder but couldn’t reach anyone.)
As an aside, I banked with a venerable local bank (Citizens) but when First Merit took them over last year and they made some changes, like Ambivalid, I closed my account there. So I’ve only had an account with Chase for a year. I have a dim view of mega-banks generally but Chase offers free premium checking to military/former military, with all the bells and whistles, and having branches all over the place, they’re really convenient.
Why didn’t you say so? That’s why they didn’t cash it. How would they know it was good if the drawer didn’t answer his phone?
By the way, re:worst-bank-chat: people complain about banks all the time, and for good reason. If you’re not happy, complain with whoever’s in charge of them and open an account elsewhere. Somebody in town will be happy to bank you and be good to you. The place where you keep your money does not need to be on your list of ongoing pains-in-the-ass.
Because check fraud is really, *really *common. They may have a threshold under which they’re more willing to cooperate, or they may just not cash counter checks at all unless you have an account there. Small banks tend to have stricter measures in place than a multinational, because they’re less able to take the hit.
I’ve cashed checks plenty of times over the years and never had the bank call with check writer.
I also sometimes write checks to individuals who take them to my bank to cash them; I’ve never been called.
Is this common practice in some areas?
At my bank it’s perfectly routine and a normal part of the process. But that doesn’t mean it happens on a large percentage of checks at all. The vast majority of the checks we cash for noncustomers are payroll. And most of the rest are immediately recognizable as part of that account’s normal check-writing activity. We’re different from most, though, in that we make it our business to be very familiar with our accounts’ routine activity and our drawers’ quirks.
I mention it above. Where I worked, all noncustomers presenting checks would require a phone call unless:
The value was under $1000
The payer was otherwise reachable (present at the bank, etc.)
It was paid by certain businesses that somehow got verified in our system. Like if you tried to cash a paycheck from one (IIRC Target was one of these), a prompt would come up saying “The check was issued to John Smith. Please verify” and no call is needed if it matches
I don’t remember the policy on government checks. I think you had to have an account to cash social security, savings bonds, etc.
Many banks are excessive and even manipulative in the way they profit from fees. But they’re reasonable in case of returned checks, deciding whether to pay NSF checks, and their related overdrafts, investigating phony checks–dealing with those costs manhours and money. Whenever a check is not good, it requires quite a bit from the bank to deal with it.
They may have had “Positive Pay,” a check fraud prevention measure offered by many banks. It’s not free, but it’ll pay for itself quickly if your business writes a lot of checks. Check duplication and check altering are major sources of check fraud, and Positive Pay eliminates both. In a nutshell, here’s how it works:
A business gives their bank a list of all the checks they have written. Amount, date, payee, and check number are among the information they transmit. For every check that is presented against that business’s account, it is not honored unless it is on that list, meets every single criterion, and has not yet been cashed.