The only way to guarantee they’ll actually work is to pay extra fees to your bank. If you’re unwilling or unable to pay your bank to monitor your account, you’re at the mercy of whoever you give the check to. Even if your payee is honest, they may make the honest mistake of forgetting (potentially leaving you with bad check fees). In most cases, when you receive a postdated check, you can deposit or cash a postdated check at any time. Debt collectors may be prohibited from processing a check before the date on the check, but most individuals are free to take postdated checks to the bank immediately.
You can try to cash a postdated check early, but it may or may not work. Banks may be willing or they may simply ignore the date — either intentionally or unintentionally. As mentioned, they aren’t legally obligated to delay unless they have explicit (often written) instructions from the person who wrote the check.
Financial institutions now send digital pictures of checks to other financial institutions, so they can be cashed more quickly. You’re writing a check to your landlord, but you don’t have enough money in your account. So you date the check a few days in advance — also called postdating it — hoping your paycheck will clear by then. However, it is illegal to write a check when you know you don’t have the funds to cover it, even if you hope to have the funds later. It is also illegal to pretend to pay someone without actually intending to do so. Post-dated cheques, like normal cheques, have a validity of 3 months from the date of issuance.
- ABC should not record the cash receipt until May 15, nor should it reduce the related accounts receivable balance until May 15.
- This means that the funds should not be withdrawn from the account until the date written on the check.
- The term postdated refers to a payment that is meant to be processed on a specified date in the future.
- If it doesn’t go through, the recipient might charge you late fees and a bounced-check fee.
Payments may be postdated in a number of circumstances, including if someone sets up a payment arrangement with a creditor or when there are regular monthly payments set to come out of an account. Postdated payments cannot be withdrawn from an account until the date specified. Realistically, the recipient of a post dated check may never notice that the check has been post dated, and so will record and deposit it at once. The bank is also unlikely to notice the date on the check, and in any case may have a policy of honoring all checks at once, irrespective of the check date. In this situation, the check is considered a negotiable instrument, irrespective of the date, and it is likely that the recipient will receive cash from the bank prior to the date on the check.
Can a post-dated check be cashed before the date written on it?
The explanation that we have received from management for this recent change is that accepting post-dated checks increases liability to credit union. When I raised this point with a supervisor, they said all banks and credit unions have policies about not accepting post-dated checks. A stale check is a check that is more than six months old from the date on the check. Banks are not obligated to honor stale checks, as the funds may no longer be available or the check may have been lost or stolen.
Luckily for them, Foster waits to cash postdated checks, but he isn’t legally obligated. Just because it’s legal to write a postdated check doesn’t mean things will work out the way you intended. The date you choose to use is not part of a legally binding agreement between you and the payee. In most cases, the recipient can deposit the check at any time, and the bank is free to pay funds out of your account before the date shown on your check. The credit union I work for recently changed its funds acceptance policy to exclude accepting post-dated checks.
Adopted by nearly every state, the UCC is a standard set of business laws that was first published in 1952 to regulate financial contracts. Article 3, Section 113 of the UCC outlines the rules for postdated checks. This section allows financial instruments to be either post or backdated and indicates that the payment cannot be made until the specified date on the instrument. Banks and credit unions generally state rules about postdated checks in their account disclosures. Some of the biggest banks, for example, note specifically that they can honor checks that are made out for future dates. Businesses may reject a postdated check as a form of payment — and this is well within their legal right.
- Hintz says that only criminal intent, such as intentionally not having enough money for a payment, can be grounds for check fraud.
- All content on this website, including dictionary, thesaurus, literature, geography, and other reference data is for informational purposes only.
- Payday loans customers frequently use postdated checks to repay their lenders.
In simple terms, a cheque is a type of bill of exchange that instructs the bank to transfer funds from one person’s account to the account of another person or company. If your check is cashed prior to the postdate, and funds are not available, be prepared for a headache and additional fees. Postdated checks are not illegal, but writing a check you lack the expensify + xero funds to pay is. In other words, if you have the intent of defrauding someone by intentionally writing a check, knowing you will not have the funds on the postdate, it’s illegal. The other major use of a postdated check is to pay for something in advance. For example, paying for a service before it is completed — like a contractor working on your house.
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When a business is involved in sales or purchases, it is necessary to have a practical accounting system. Banks are not obligated to wait until the date on a check to cash it or deposit funds. However, if you call them and arrange for the funds to not transfer, then they are obligated. This, however, often comes with a fee of about $30 for the bank to monitor your funds.
Post-dated Cheque – Definition, Validity and How to Write it
The bank’s not responsible, since the law lets banks cash post-dated checks before the date on the check. You could go after the person you wrote your check to, on the grounds that he broke an agreement to hold off on cashing the check. But that might be hard to prove, and the amount involved—the bounced check fees—probably aren’t enough to sue over. A postdated check is a check that has a date in the future for when it can be cashed. People may use post-dated checks with a variety of service providers.
Many bigger banks, however, will honor postdates as part of banking agreements. Be sure to check with your bank about specific account disclosures for more information. In summary, post-dated checks can be a source of confusion and legal complications, and can also restrict the liquidity of funds. If a payee wants to ensure that a check will not be cashed prematurely, it’s better to use a check that is marked “void after” or “not valid before” the specified date.
FAQs on Post Dated Cheque
If you don’t need the money immediately, this is another courtesy to the check writer, and this can help keep trust between you and them. There are multiple reasons why you may need to write a postdated check and the reasons can vary greatly depending on your personal situation. Below are some common reasons why individuals choose to write postdated checks. Sometimes, the alternative doesn’t work, and you choose to issue post-dated cheque(s) assuming the funds will be available on the future date.
Use cases of Post-dated cheques
This means that the funds should not be withdrawn from the account until the date written on the check. This type of check is often used for paying bills or for making payments on loans or other debts. Post-dated checks can be written for any amount and can be made payable to any person or organization. The person who writes the check is responsible for ensuring that there are sufficient funds in the account on the date the check is written to cover the amount of the check. The key difference between a stale check and a post-dated check is the intent of the person who wrote the check.
This is kind of giving assurance to the recipient or the drawee that on this future date, the payment will be honoured. For instance, someone with a car loan can schedule postdated payments to be transferred electronically from their account to the lender. Therefore, although it’s not generally a good idea to write post-dated checks, the careful writer of post-dated checks will notify his bank as soon as possible about his post-dated check. Don’t be surprised if the bank charges a fee for having to be extra careful. If they weren’t, “pay day” lenders, and other crude forms of credit, couldn’t exist. In the United States, post-dating a check, on its own, has no valid use.
Those who are into a business most certainly have come across this important financial instrument in the business world. In truth, issuing a PDC cheque is not always the best course of action. Because you never know if you’ll be able to have funds in your account on the specified future date.
Unfortunately, this is not always honored by banks or the organization cashing the check. First, let’s take a look at some possible reasons why you would want to postdate a check. Issuing a post-dated cheque also involves a process of informing the bank with the written instructions which are cumbersome. To add to it, each bank has different policies monitoring and preventing premature payment. Today, most of the banking process has been automated and banks rarely look at the date mentioned on the cheque.
Identity theft occurs when someone obtains personal or financial information of another person in order to assume that person’s identity to make transactions or purchases. Keep in mind, though, that banks and credit unions can cash postdated instruments early. While they may not do so intentionally, there are cases when checks are put through by mistake.