Checks and balances

[pne]

A question for the American readers of my journal: How do cheques/checks work in the States? (I see HowStuffWorks has an article about this, but it's fairly short.)

From what I hear, cheques are a very frequent method of payment over there, for paying for groceries, paying your credit card bill, paying authors ("The Czech's in the male!"), and so on. But in German, I'm not used to using cheques much; I think they've become even rarer recently now that eurocheques (with a guaranteed balance) don't exist any more.

I would say that most people, if they don't pay cash, use ec cards in shops and direct money transfers (either direct debit or a real transfer) for other things, e.g. ordering things via mail, paying rent, or the like.

Do American checks have to be written out on special forms issued by the bank? Or are there "neutral" forms you can use regardless of which bank you choose?

When you write out a check, what happens to it? I gather that the person receiving it deposits it with his bank, then the piece of paper gets sent to your bank, your bank pays theirs somehow, and you get back the check?

When you receive a check from someone else and deposit it, is your bank account credited with that amount immediately? Or do you have to wait? For how long? Does the length of time depend on whether you're using the same bank as the issuer?

When you deposit a check, do you get cash? Or do you have to deposit it in an account? Or can you do either? Are there different kinds of check for each? (I know that in Germany, there are "Verrechnungsschecks" which can only be deposited, not exchanged for cash, but mostly people turn an ordinary cheque into a Verrechnungsscheck by drawing two diagonal lines across the top left corner and, optionally, writing "Nur zur Verrechnung". Apparently, those are safer especially if they get stolen, because you can tell where the money went since there's a name behind the account.)

I'm especially curious about the "getting it back" part, since I've never heard of that in Germany; I think I'd simply expect to see an amount deducted from my next bank statement. Is the check crossed out or cancelled somehow when you get it back? Can you tell who deposited it, in which bank, or on what date? Can you tell whether a check was never cashed? Does the check get sent to you by postal mail? With your bank statement or separately?

What does "balancing your checkbook" mean? Does it refer to taking the cancelled checks you got sent bank and cross-referencing with the deductions on your bank statement? Or do you keep track of issued checks on a form the bank provides you and you tick them off when the check has been cashed? Or what?

Comments

[bride.livejournal.com]

About the only thing I use cheques for is to print a big "VOID" on them and give them to someone to start automated payments with =D I rarely use them to actually pay something. I'm not sure if this is a Canadian thing or if it's just me. I pay everything online. =)

My bank (Royal Bank of Canada) charges me $4.00/month as a service charge. With that, I get online consolidated access to all my accounts (and any account data from other financial institutions if I really wanted to) and my credit card account. I get 10 free debit transactions per month (or was it 15? It's way more than I use, anyway...). I think I can also trade stocks and things online with them, but I don't use that feature.

Cheques are ordered from the bank. 200 for $20 (or something like that). They have my name printed on them and the standard cheque format with blanks to fill in the info. They're also encoded with a magnetic strip woven into the paper at the bottom with the financial institution numbers, account numbers, etc. Usually, they'll also tout 3-4 other "fraud prevention" features.

I only use cheques at places that don't take plastic and it's too much to be carrying that much cash around. I usually don't carry any cash on me. My bi-monthly paycheques get directly deposited into my account (I gave them one cheque with "VOID" on it =D).

You can deposit a cheque directly into the account. You can ask any bank to honour a cheque and give you cash. Usually if you have an account at that bank, they won't charge you extra for honouring the cheque. If you are not a client, they usually charge you something. Foreign currency cheques also get dinged a little with the exchange rate, then charged if you're not a client.

I think there's a holding period of a week for large amounts, but I've never run into problems with that.

I'm especially curious about the "getting it back" part

My cancelled/honoured cheques are enclosed with my monthly statement. Some banks do, some don't, some charge extra to do it. They asked me so I said yes =) Your cancelled cheques can be used as proof of payment and is admissible in court in the case of a dispute.

They're stamped up and down, scribbled and signed on. It shows the endorser/depositor's signature on the back, date of deposit, sometimes, their account number is written on the back, a stamp when it's processed by the payee's bank, a stamp when my bank gets it, a stamp when it's processed by my bank.

Can you tell whether a check was never cashed?

If it was never cashed, you'd never see the cheque and you'd never see the debit on your statement. =) You'd be able to see though, if someone other than the payee you specified deposited your cheque. There is something special they have to write on the back and they have to print their name. You can then report it as theft.

"balancing your checkbook"

This means trying to figure out exactly how much money you have available after:

• all the deposits you made to the chequing account have been added
• all the cheques you've written and have been cashed are subtracted
• all the cheques you've written but have not been cashed are also subtracted (because that money is really not available to you anymore; it's still in your account because the 4 step transaction between banks can take up to a week and it hasn't been completed yet)

[bride.livejournal.com]

Re: Balancing

Oh yeah, I forgot the service charges, interest (all $0.02 =P), withdrawals, deposits and all activity that needs to be added and subtracted as necessary. I don't manage my money this way, I do a simplified cash flow analysis.