Categories
Check Cashing

Check Verification: How do banks and check cashing places work?

Check Verification Process: Cashing a check involves a process of verifying that the funds are available to cover the check.

This can be done by either contacting the issuer of the check or using a third-party verification service.

If there are insufficient funds in the checking account, then a fee may be assessed by the cashing location.

Banks and check cashing stores use different methods to verify checks.

For example, banks may contact the issuer directly to verify the check, while check cashing stores may use a third-party verification service.

However, both banks and check cashing stores may charge a fee if the check bounces.

Check Verification Process

  • When you go to a bank or check cashing store to cash a check, the person at the counter will first verify that you are the rightful owner of the check
  • They will then ask to see some form of identification, such as a driver’s license or passport
  • After verifying your identity, the person at the counter will ask how you would like to receive the funds
  • You can either have them deposited into your bank account or have them paid out in cash
  • If you choose to have the funds deposited into your bank account, then the check cashing store will contact the issuer of the check to verify that the funds are available. Once the verification process is complete, the funds will be deposited into your account
  • If you choose to have the funds paid out in cash, then the check cashing store will contact a third-party verification service to verify that the funds are available. Once the verification process is complete, the funds will be paid out to you in cash.

Authentication and Verification Process

Generally, check cashing places do not verify the funds on a check before cashing it; however, they will authenticate the check after you try to cash or deposit it.

This means that the check-cashing place may contact the issuer/check maker to confirm that the check is valid.

This process helps to protect both the check-cashing place and the customer from fraudulent checks.

Banks may also authenticate checks, but they typically contact the issuing bank to confirm whether the check is valid before depositing it into the customer’s account.

Here, the bank is trying to protect itself from fraudulent checks and to ensure that it is not depositing a bad check into the customer’s account.

If it’s a personal check, the bank or check-cashing place may also call the person who wrote the check to verify that they actually signed it.

This is done to help prevent fraudulent checks from being cashed.

Bad checks can have serious consequences for the person who wrote them. So, it’s important to be aware of these risks before you attempt to cash or deposit a check.

Banks

Different banks have different check-cashing policies for verifying funds before depositing or cashing checks.

In general, there will be an authentication process after the deposit is made.

This process typically involves contacting the issuer of the check.

Example

So, for example, let’s say that you hold an account with Bank of America and you make a deposit into that account of a check written on an account at TD Bank.

In most cases, BOA will contact TD Bank after you make the deposit in order to verify that the funds are available.

This is not to say that Bank of America will necessarily refuse to deposit or cash the check if it has not been verified.

It is just that they typically do this as a safety measure.

Bad Checks

When a check bounces, it means that there are not enough funds in the account to cover the amount of the check.

The bank has to take back the check and may charge a fee for doing so.

This fee is intended to cover the bank’s costs associated with returning the check, such as postage and handling.

If it is your account that is overdrawn, you may also be charged a fee by the bank.

So, when a check bounces, both the person who wrote the check and the person who received it may end up paying fees.

Check-Cashing Stores

Same as banks, check-cashing stores have their own policies regarding authentication, verification, and fees.

Using third-party verification systems is the most common way to authenticate checks. This usually involves contacting a credit bureau or check verification service.

Most popular check verification services include ChexSystems, TeleCheck, and Certegy.

These are used by check cashers to ensure that the checks they are cashing are not fraudulent. For example, Kmart uses Certegy to verify its customers’ checks.

Walmart

Walmart takes suggestions from TeleCheck on whether to accept a customer’s check.

This is based on TeleCheck’s proprietary algorithm, which looks at the customer’s checking history and check-writing history in order to determine if the transaction is valid or not.

In case TeleCheck declines a customer’s check, it is likely because the purchase type is suspect.

In such a case, Walmart would not be able to approve the check and decline the transaction.

The company also uses another third-party check verification, Certegy, to help with the approval or decline process of customer checks.

So, if a Walmart customer’s check is declined, it’s likely because TeleCheck or Certegy determined that the check was not valid or fraudulent behavior was suspected by those services.

Money Mart

Money Mart is another popular check cashing place where you can cash personal checks, government checks, payroll checks, Insurance checks, small business checks, and money orders.

The check cashing verification process at Money Mart is the same as at banks. They verify the check either by contacting the issuer or verifying the identity of the person.

Carrying a government-issued photo ID card such as a driver’s license is required.

ACE Cash Express

The check cashing verification process at ACE Cash Express is straightforward.

The company will contact the issuing bank to confirm whether the check is valid and drawn on an active account.

So, if your bank account has sufficient funds to cover the check, ACE Cash Express should not have any issues verifying its validity and cashing it.

Another important thing to note is that ACE may choose not to contact the issuing bank at its own discretion. And, there won’t be any background credit checks too.

Check Into Cash

As per its check cashing policy, Check Into Cash verifies the identity of its customers by contacting the issuing bank for personal checks.

The check issuer/maker may also be contacted to verify identity in some cases.

This 2 step verification policy is likely in place to reduce the risk of check fraud.

So, if you’re looking to cash a personal check at Check Into Cash, an ID like a driver’s license or passport will likely be required.

Conclusion: Check Verification Process

Banks and check-cashing stores verify checks by checking the account number and routing number that is printed on the check. They also verify the signature on the check.

At first, the bank or check-cashing store will try to contact the account holder to verify that they wrote the check.

If they are not able to reach the account holder, they may use a service like ChexSystems to check for any negative information about the account.

Third-party verification services like TeleCheck also exist to help banks and check-cashing stores verify checks.

These services use a database of information about checks that have been written in the past.

If a bad check has been written in the past, it will be listed in the database and is attached to the account number and routing number on the check.

This way, the bank or check-cashing store can be sure that they are not cashing a fraudulent check.