2 weeks Ago By Angela Scott-Briggs
Share Tweet Share Share Email As digital payment methods continue to gain preeminence, traditional paper checks have been on the reverse trend. A recent blog post by CNBC revealed notable statistics — that check usage has plummeted by nearly 75% over the last 2 decades. Interestingly, amidst this decline, voided checks are still functional in the modern financial landscape, especially in setting up direct deposits and authorizing recurring payments.
But do you know the legal implications of voided checks? If not, then this article is for you. Herein, we’ll explore all the ins and outs of voided checks, including the legal implications of voiding them. What Is A Voided Check? Source A voided check is simply a canceled papercheck.
In other words, a voided check is just like the regular blank check, only that a voided check contains the word VOID written across it. So, how do you void one? Actually, voiding a check is simple : Just write the word “VOID” in large letters across the face of the check using a blue or black pen and ensure that the writing is bold enough — and that’s it! Alternatively, you can write the word “Void” in the date line, signature line, and other fields you’d otherwise need to fill when issuing a valid check. By voiding a check, you prevent it from being cashed in or negotiated.
But that’s not to say it’s entirely safe to issue it to anyone. There’s still some sensitive banking information at the bottom of the check that you need to protect, for instance, your account number and routing number. Therefore, it is always recommended that a voided check only be issued to trusted persons to avoid financial fraud.
And remember, don’t make a mistake of using a pencil when voiding the check, as this can be easily erased and the check used to withdraw money from your account. Uses of a Voided Check Although voiding a check strips it of its primary use, there are still some valid reasons for doing so. A case in point is when setting up a direct deposit account.
In this case, the employer will require you to provide a voided check to help verify the accuracy of information provided in the direct deposit form. Doing this mitigates risks likely to emanate from giving inaccurate information. Properly voided, a check will still reveal essential banking information needed for an electronic money transfer, such as the routing number, account number, and other details.
That makes it a reliable tool for confirming the accuracy of provided banking details before doing the actual money transfer. Besides its use in direct deposits, voided checks are a common requirement when setting up regular automatic bill payments. And in some cases, you might be asked for one when applying for a loan as proof of account ownership.
How Can You Void A Check Once Issued? Once you’ve issued a check and want to void it, the only way to do that is to place a stop-payment order with your bank. This should happen as soon as possible before the payee presents the check to the bank. Once you’ve placed this request, the bank will void the check from their end, preventing any withdrawal.
However, you might be required to pay small fees, which vary from bank to bank. In case the stop-payment request comes after the check has been cashed in, your account will remain debited, and the only viable option to recover the money is to pursue a refund from the payee. What Are The Legal Considerations When Voiding A Check? Source While voiding a check is a straightforward task, it’s essential to ensure that it’s done on legal grounds.
Otherwise, you can attract harsh consequences in the form of heavy fines and sometimes even imprisonment. For instance, once a check has been issued to the payee and then the payer proceeds to place a stop-payment request with the bank before the check is processed to evade fulfilling their contractual obligations, that’s considered a crime. In that case, the payer might be charged of a contractual breach and dealt with lawfully.
That’s because as much as voiding a check negates the payment obligation linked to it, it doesn’t free the payer from their contractual obligations. As such, even with a voided check, the payer is still expected to play their part as agreed in the contract, even if through other agreed-upon payment methods. Suppose a check is voided after the payee tries to cash it, and it was knowingly issued without insufficient funds in the checking account, that’s treated as writing a “bad check”, sometimes known as a Non-Sufficient Funds (NSF) check, which is considered an offense of felony or misdemeanor in most jurisdictions.
In the event that a check made for payment such as loans, utility bills, credit card bills, and other bills is voided, it may lead to non-payment. If payment isn’t pursued using other means, it might attract negative credit reporting, consequently impacting the payer’s credit score. How To Dispose Of A Voided Check While a voided check can’t be cashed in when the voiding is done correctly, it’s still essential to ensure that you dispose of it properly.
Source Otherwise, you may inadvertently disclose sensitive information to the wrong persons possibly leading to financial fraud. Let’s look at some of the best ways to dispose of a voided check: Only Share With Authorized Persons: When sharing voided checks, only ensure that you issue it to trusted individuals and organizations. Shred or Tear: You can use a shredder to tear the voided check into small confetti-sized pieces.
Doing this will ensure that it doesn’t disclose the sensitive information contained therein. Avoid Public Trash Bins: Using trash bins creates the probability of the check falling into the hands of identity thieves. And remember, in case you lose a voided check, it’s best to notify your bank to halt it from being cashed in.
Alternatives To Voided Checks While voided checks are the easiest way to verify account ownership, they may not be a viable option for everyone. Plus, not many people would be willing to sacrifice a check from their checkbook. In that case, one can pursue other alternatives: Voided counter check: In some cases, you can request a voided counter check from the teller at any of the branch locations.
A photocopy of a check or deposit slip of your account Direct deposit authorization form: When setting up direct deposits, this should suffice even without the voided check. Only ensure that you double-check the bank account details and other information you provide for any errors. A deposit slip showing your banking information.
Conclusion Voided checks can’t be cashed in if the voiding is done correctly. However, when voiding a check, it’s important to acquaint yourself with the legal implications of taking that step. When voiding is done improperly or in bad faith, it can lead to civil lawsuits, criminal charges, financial consequences, and other harsh repercussions.
However, when done under legitimate grounds, such as to correct an error or prevent fraud, voiding a check is a valid and legally protected action. In other words, to be on the safe side when voiding a check, ensure that you follow the correct procedure for doing it. Related Items: banking , Check , checking account , payments , Voided Check , Voiding a Check Share Tweet Share Share Email Recommended for you Architecture for the Future of Corporate Banking TD Bank’s Compliance Wake-Up Call: Why AI is the Future of Financial Accountability Valery Miroshnikov: Career at the DIA Comments.
