Checks have been in use for a long time and are considered to be a convenient mode of transaction by most businessmen. The only additional task related to them is the employer must send his employee to cash it within a specific time. If he fails to remind his HR employee or any other professional who is in charge of taking stale check definition the checks to the bank, they become stale-dated checks. If they do this in a timely manner, the check clears, and the payment gets transferred from the payor’s bank account to the payee’s bank account. The payor, or person with the checking account, writes a check to the person they want to pay in the payment amount.

The Life Cycle of an Outstanding Check from Issuance to Clearance

The bank decides to return the check to the issuing bank to clarify with the issuer. Moreover, cheques are convenient because they can be post-dated, which means you can write a cheque today for payment next week, next month, or even next year. This can be helpful if you need to make a large payment but don’t have the funds immediately available. Finally, cheques offer a degree of safety that other methods of payment do not. Unlike cash, cheques can be traced if they are lost or stolen, and most banks will replace stolen or lost cheques without charging a fee. If possible, try to go to the branch where the payor’s account is located, as they may have a banking relationship with the person or business that wrote the check.

Personal Checks vs. Company-Printed Checks

In some cases, if a person’s bank was negligent – e.g., their bank failed to perform due diligence in verifying the check, then they could request compensation for any losses or damages. If the bank is at fault, a person could explore filing a claim in court. However, a bank is typically only liable for honoring a check if there is an issue other than the date of the check, such as a forged signature or the check was counterfeit or fraudulent. Besides the bank penalties you incur, you will have an outstanding debt to your landlord until you can pay the rent. Our writers and editors used an in-house natural language generation platform to assist with portions of this article, allowing them to focus on adding information that is uniquely helpful. The article was reviewed, fact-checked and edited by our editorial staff prior to publication.

Watch out for ‘deposit item returned’ fee

PNC has many useful articles to help you make the most of your money. An outstanding check doesn’t cost anything beyond the paper it’s printed on. However, having to cancel or put a stop payment on a check can be costly. Putting a stop payment on a misplaced or stale check may prevent issues down the road, especially if there’s a concern that it could fall into the wrong hands. However, this doesn’t always solve the problem, as it costs a fee to the payor and is only valid for a limited time.

This is because when too much time has passed since a cheque’s date, it becomes stale and is no longer valid. A check is considered to be a stale check if it is not presented by the receiver of the check to the bank after a considerable amount of time. Another thing a person can do to prevent a stale check from clearing is to freeze their account. Typically, accounts are frozen if checks have been stolen or there is other possible fraudulent activity, but a person can always ask to have their account frozen. However, it is up to the bank to decide if it will process a stale check. If a person wishes to cash a stale check at the issuing bank, then they would need to get approval from that bank before presenting the stale check.

Unclaimed property and escheatment laws

Some checks come printed with text stating that a check becomes void after 90 days. This can be safely disregarded as an attempt to remind people not to hold a check for too long. The six-month rule applies regardless of what is printed on the check.

• It prevents the other business owner who is on the client-side of the table from cashing old and new checks, thereby maintaining transparency in the business.
• You must handle bill payments, clear debts, and ensure timely employee payment.
• Such a call may be awkward, but it’s better than imposing an overdraft fee on the person or business that wrote it.
• In some cases, the issuing bank may specify an expiration date on the check itself.
• Let the owner know how he or she can claim his check and provide a deadline for doing so.

The company may be willing to reissue the check, even if it’s stale. Today, we’re here to provide you with all the information you need about stale-dated checks. Whether you’re waiting on a vendor to cash a check or recently came into an old check, you’ll find out how to handle it in this article. No, you cannot deposit a stale check into your account because, by virtue of being stale, it is not eligible to be deposited. Cashing a check promptly ensures that you can access the funds without issues, such as the check bouncing or having it go stale. If you ever come across an old check, the best option might be to contact the issuing bank or the check’s issuer to determine its current status.

This will ensure that the original cheque makes it to the bank rather than finding its way into a drawer where you can forget it. When you receive a cheque, it may be tempting to procrastinate in either depositing or cashing it. This is especially true if the amount of the cheque is relatively low. However, if you leave an uncashed cheque for too long, you risk not being able to access that money at all.

The possibility of clearance of the business amount lies with the bank itself. Like personal checks, company-printed checks, such as checks issued by a business for payroll or other purposes, are good for 180 days or six months. That means if you find a stale check made out to you, contact your bank and the check-issuing bank and find out their policies. A stop payment informs your bank that you do not want the check cashed. A stop order prevents the other business owner from cashing both the original and new checks.

Factors Leading to a Check Remaining Outstanding

A Stale Check is defined as a check that is presented to the bank after a considerable amount of time from the date that has been mentioned on the check. The dating timeline in this regard is mostly of a duration of 6 months or more. Knowing how to properly fill out a check helps you avoid errors that can cause a check to bounce. Stop payments are an essential factor as they highlight why bookkeeping is necessary for the success of your business. Resourceful Finance Pro, part of the SuccessFuel Network, provides the latest Finance and employment law news for Finance professionals in the trenches of small-to-medium-sized businesses. Rather than simply regurgitating the day’s headlines, Resourceful Finance Pro delivers actionable insights, helping Finance execs understand what Finance trends mean to their business.