$2,500.00 USD was taken out of the checking account of a New Jersey woman who placed a “stop payment” on a check to a company that did not complete a work order on her house.
The company submitted the check three times over three months for payment and three times the check was returned un-cashed to the company.
Exactly six months and a day after the check was written, the company
tried again to cash the check and the bank handed over the $2,500.00.
The woman’s bank account immediately redlined. She bounced a month’s
worth of checks.
Her credit score was ruined.
What happened to that woman could easily happen to you.
When I was growing up in Nebraska and you put a “stop payment” on a
check that meant that check was forever dead. Today, however, that is
not always the case. Did you know each state creates its own banking
laws even though they are federally insured by the FDIC? In New Jersey
a “stop payment” request on a check is only good for six months.
six months you must re-initiate the stop payment or that check becomes
alive again as the company in my example knew and exploited. Not only
do stop payment requirements vary from state to state but the policy
for how long a check is “live” varies from bank to bank within each
state. In the case of the New Jersey woman, her bank will cash a check
up to a year after it was written so if you want to guarantee a check
is killed at her bank you must do a stop payment every six months at a
cost of $20.00 USD for each stop request.
Other banks will only process
checks that are less than six months old from the date on the check
while some banks will still kill a check forever with a single stop
Banks hate check stops because they are then obligated to pay to
process that check as a stop throughout all the banking databases and,
unlike a check that is actually cashed, a stopped check must always be
watched and kept alive in the system so it will not be cashed. Many
banks will not tell you a stop payment will expire unless you ask.
well, many banks will not tell you how long a check is considered
“live” after being written unless you ask. Keep asking. Banking laws
and rules and regulations are always changing. Never assume you know
anything until you ask and ask again. If you are ever unlucky enough
that you have to place a stop payment, make sure you know when and how
to renew a stop and always watch your bank account online every day
because there are times when a stopped check gets through the system
anyway and destroys your bank balance.
The sooner you see something
wrong with your account, the faster you can invoke your right to remedy
and preserve your good name and credit score. What is your bank’s
policy on stopping checks? How long is a check alive in your bank’s
system? Have you ever placed a stop on a check to only have it cashed
anyway? If you are an international reader, are you able to stop
payments on checks? How long are your checks alive after being written?