Paying 2.5% per credit card transaction, even for American Express, seems like a small price to pay for some peace of mind. Since these transactions happen months before I have to deliver the services there is plenty of time for the credit card company to deal with it if it turns out to be a fraudulent card. If the credit card company doesn’t notice the inappropriate charge soon after it is made then the rightful owner of the account will probably notice it when they see their monthly statement.
A debit transaction would be good too, but I don’t know many people in the US that use debit cards except for relatively small purchases such as fast food or gas.
If someone gives me a check that bounces after I have provided the service then not only am I out the money owed, but I have lost the opportunity to provide a service to someone who wanted it and was willing to pay me what it should cost. And if someone knowingly passes me a bad check imagine what they will do to my property if given half a chance… and I will have very little recourse once they have left the state and gone back to wherever they came from.
If you recall, one of the tricks in Catch Me If You Can (based on a real-life story) was that the fellow learned about routing codes. He printed cheques appeared to be drawn on a local bank, but in the time-frame (60’s?) the cheques were routed by automated sorters based on the OCR numbers at the bottom of the cheque. So he put on routing numbers that sent the cheques across the USA. With the back-and-forth and processing times in those days, it would take a few weeks for the cheque to travel from one coast to the other, be determined to be forgeries, and then be sent back uncollectable.
I fnd it hard to believe a cheque cannot clear within 10 days in this time of image processing and electronic communication - but maybe some US banks are stuck in the bronze age.
As for signature forgery - i.e. the account is genuine, the cheque either a good forgery or stolen, the signture does not match - that’s pretty much like a game of hot potato, except if you can give it back where you got it, you do. Bank A cashes a cheque for Mr. X written allegedly by Mr. Y drawn on the real Mr. Y’s account in bank B. When the crime is discovered, B might even have handed out the money to A. If so, they get it back (If A is still in business - a risk in the USA). If A is now out the money, they will get it back from X. Then it’s up to X to recover from Y somehow, not the bank’s problem.
This is my understanding - you can either cash a cheque with your own bank, orthe bank it was drawn on (in the good old days, usually the actual branch). There they had the signature card and could compare, would recognize their own cheques, ask you for acceptable (to them) ID, etc. If you cashed at your own branch, it was implicit that your account and funds were a guarantee that you were on the hook for the validity of that cheque. They are just doing you a favour based on your status as that customer. Some would evn waive the 10(?) days if they thought you were good for the money regardless.
Back in the OP, dolphinboy mentioned, " after the 10-day waiting period the money shows up in my bank account."
I asked my wife, a CPA who worked for a bank for several years, about that. She said that “10 days” stuff is a relic from the past. Almost all inter-bank business is done electronically, and usually the physical paper doesn’t even change hands. There’s no excuse for a bank to put a hold on funds for 10 days. In some cases, the weekend plays into it, but a lot of banks do some business 24/7/365 even though the brick-and-mortar doors are not open all that time.
You did nothing wrong, but ultimately, someone who did nothing wrong is going to lose the money, and you’re the best option.
Consider the case of a forged check on someone else’s account. There are (arguably) 5 parties involved: The account holder, his bank, your bank, you, and the forger.
Clearly, the only party who did something wrong was the forger. But presumably you can’t get the money back from him. He already consumed the goods or services he fraudulently paid for. So one of the four honest parties has to pay for it. Clearly the banks are not going to do so. They didn’t get to be giant powerful financial corporations by covering the risk of fraud. It’s hard to argue that the account holder should pay for it. If something of yours is stolen and then sold to another party and found, you get it back. Sucks that the person who bought it is out money, but it’s your property.
You’re the only one who’s even sort of in a position to determine if the check is valid; it falls on you.
You should not accept a personal check from anyone you wouldn’t take a verbal IOU and a handshake from. The penalties for kiting checks are harsher than for breaking a verbal contract, but your chance of getting actual money from a person who decides to screw you is negligible in both cases.
Seven business days can easily equal 10 calendar days.
The Check Clearing for the 21st Century Act (Check 21), designed to speed up check clearing, has not been implemented to the point that regulators have seen fit to reduce hold times allowed under Reg CC.
Note: the EFAA mentioned in the quote above is a part of Reg CC.
While in reality your wife’s assertion is mostly correct, by regulation it is not.
Ultimately, you are deciding if to accept a cheque or promise to pay. All the bank is doing is simplifying the process of converting that to cash. If it turns out the cheque is not valid, it’s your problem because it was your decision.
(Wasn’t it the case a while ago that the debit card or similar bank card ID was acceptable as ID guaranteeing a cheque? I.e. some banks said, if the holder of the card presents a cheque and the card, the bank will guarantee the cheque? Of course, with debit available everywhere now, that is less the case I assume.)
I realize that I was taking some amount of risk if I accept a check not knowing whether it was good or bad, but I assumed that my bank wouldn’t deposit the funds into my account until they got the money from the bank that issued the check in the first place, and that the issuing bank would stand by the check. My assumption was completely wrong.
The problem seems to be that everything may seem okay, and the money is transferred from one bank to the other in good faith, and then at some point in the future, perhaps much much later, the bank that issued the check can say sorry, and pull the money back from my bank, who in turn can pull the money back from me, long after I may have spent it. Meanwhile I have provide the services to the person who passed the bad check, who is now long gone.
It seems like I am taking all of the risk here and the banks have no legal or moral responsibility to verify the check is good. Since I have no real way to verify the ‘goodness’ of the check myself I can’t simply assume it is good and not worry about the times that it isn’t.
I would rather have my rental property sit empty than get stung because of a bad check. That’s my business decision to make.
How is the bank going to verify that the cheque is good without either comparing the signature on every cheque with a signature card (do you REALLY think that is practical? think about it from the point of view of the bank before answering) or waiting a month or so for the account owner to notice a forgery? Don’t forget that not everyone does all their banking by computer even in this day and age.
You have a tradeoff and it is entirely your choice how to address that tradeoff. Be very convenient and accept ordinary cheques (hopefully resulting in enough additional business to outweigh the additional fraud) or accept only money orders/cashiers checks/bank drafts (pretty sure what you call a cashiers check I call a bank draft)/certified cheques and reduce customer convenience while at the same time reducing (not eliminating) fraud, or take credit/debit cards and get dinged service charges but also reduce fraud, or take cash only (and still potentially run into problems with counterfeit currency). Your choice where to strike a balance between convenience and security.
I posted an anecdote about 10-day holds here. Folks might find it an amusing read about the way banking was done in the early 80’s.
When dealing with large sums, I ask the purchaser for a cashier’s check drawn on any of the banks I have accounts at. When I do a window deposit of the check, they can immediately check for the most obvious types of fraud, since they can verify immediately that the origin account was debited for the amount of the check, and that I was listed as the payee. The only possible issue would be if the origin account holder told their branch that the check request was made by someone not authorized to use the account or similar.
When I did this for a 6-figure check earlier this week, the teller had a rubber stamp that put a half dozen or so checkboxes on the check I was depositing. Some of those she was allowed to check and initial herself (presumably some of the stuff I listed above), but then a manager had to check and initial the last box. And then the money appeared in my account.
I’m still trying to wrap my head around the question: Why would anybody ever fall for this kind of scheme. I know there are some dumb people out there. But I can’t see how anybody can be that dumb, yet still be allowed to manage his own money.
If you ask for a USPS money order, there is no problem with forged documents or issuers out of the country.
As a matter of fact, since somebody decided that an image of a check is enough to process, a check drawn on a US bank and deposited in a US bank will clear in 24 hours, and usually within 4 hours.
This is because all of the banks send their received checks to the Federal Reserve, which acts a the Clearing House for US banks. Yes, this assumes all US banks are members of the Fed.
If the issuing bank is not a member of the US Federal Reserve, then you can be back to the days of waiting for a piece of paper to make its way around the globe.
…outside of the US bank to bank transfer is probably the most common payment method for anything that is person to person: and eft-pos (electronic funds transfer at point of sale) when you are out and about shopping.
I see a business opportunity here… and I’m not talking about Bitcoin, where two parties can move money from one bank account to another bank account, with absolute certainty.
As I understand it, a wire transfer provides a guaranteed and secured money transfer within one day, but you have to pay a lot for that level of service. I recently purchase a property and had to do a large wire transfer from my Merrill Lynch account in CA to a title company in MT. Merrill charged me $40 for a wire transfer.
An EFT does basically the same thing, and is cheap (in some cases free), but it can take from 3-5 business days to complete. Assuming someone could go to the bank and provide valid ID, an EFT can be as secure as a wire transfer. One source of fraud is when someone gets hold of your online banking password and initiates a fraudulent EFT.
So we need a cheap and secure EFT than can be completed within two business days, depending on whether both banks have a common interchange bank. I don’t see why this should be so hard.
US Postal Money orders can be forged - you just need to get your hands on blank ones (stealing from the Post Office is a serious Federal offense, and they DO come after you), then get a machine that can duplicate the imprint the machines at the PO make.
Then the fraud will be detected instantly when the document is presented for payment at the seller’s P.O.
It can be done, it is very risky, and there are many simpler ways of producing a “Money Order” on much more easily obtained stock.
Let you in on a secret: that “wire transfer” is a huge rip-off.
I paid for one once, and watched the teller go to a terminal and key up a transaction and click “Send”.
AIUI, after many years slinging code for banks: Checks, as mentioned above, go through the Fed for settlement. What this means is that a transaction (I actually wrote code for the CACHA clearing house system) representing that check gets sorted and distributed.
That “wire transfer” is simply keying a transaction which gets sent along, just as the ones generated by the check readers.
Now that Ebay owns a bank (Paypal’s “Bill Me Later” is a 20%APR credit card issued by a tiny bank they bought), they could easily key up “wire transfers” for you - I suspect that is actually how Paypal moves money around.
There are online payment schemes - ebay offers alternatives to Paypal, I"m guessing for anti-trust reasons.
So banks could hire people to do cheap wire transfers if they wanted to, but instead they charge $40 to discourage people doing them, and as a result we have to deal with bad checks.
I would have thought we would have solved this problem with the advent of computers and the Internet, but it seems that nobody really wants change, and everyone is willing to deal with a certain amount of fraud.
Let’s say you want to rent dolphinboy’s vacation property. He doesn’t accept credit cards or debit cards because he’s not a company, he’s just a guy. And to do a bank-to-bank transfer, he’d have to give you his bank account number.
If he doesn’t want to accept a personal check from a stranger, he sure as hell won’t want to give a stranger his bank account info. (Neither would I, FWIW.)