Over 90 percent of small business owners accept checks. If your customers prefer this payment method, it's important to make sure their checks are valid. Each year, more than 500 million checks are forged in the U.S. Check fraud is responsible for losses of up to $18.7 billion annually. Not to mention stale checks, which are cheques that may no longer be valid.
How Long Is a Check Good for?
Even though the number of check payments has declined lately, many business customers still use this payment method. Companies prefer checks because they provide more information than electronic payments do. Additionally, they take longer to process, which creates a liquid advantage.
It's not uncommon to misplace a check or forget about it altogether. Once it resurfaces months or years later, it may or may not be valid. Banks are not required to process checks that are older than six months.
Bank of America stale check policy, for instance, states that they may still pay a check that's dated more than six months in the past unless the issuer places a stop payment order on it. In general, it's up to the bank's discretion to approve or decline stale-dated or postdated checks.
Check Expiry Date Considerations
Large corporations will typically print expiration dates on business checks. This allows them to better manage their flow of money. For example, they may include a statement specifying the check expiry date or simply print "void after 90 days" on a check. However, banks might not notice the date or choose not to comply with these terms.
Small businesses, in general, are not as strict as large corporations regarding the checks issued to their customers. Most times, they will include an expiration date or other special notes. In this case, the check becomes stale after six months. If you want to cash it, contact the bank and ask whether their policy allows it. Waiting is risky. The issuer may close its bank account, go bankrupt or stop payment on that check.
How to Cash Old Checks
According to the Uniform Commercial Code (UCC), there are no set rules regarding check expiration dates. This applies to both personal and business checks. Banks have the right to implement their own policies. Even though they are not required to honor old checks, they might choose to do so.
If you have a stale check, simply call the bank and ask what its rules are. If the bank refuses to cash it, contact the account holder and request a replacement. Be aware that if the bank accepts your check, it may charge a processing fee.