STALE DATED CHECKS: How It can Affect Your Business

stale dated check meaning

A check is a financial instrument that authorizes a bank to transfer funds from the payor’s account to the payee’s account. When the payee deposits the check at a bank, it requests the funds from the payor’s bank, which, in turn, withdraws the amount from the payor’s account and transfers it to the payee’s bank. When the bank receives the full amount requested, it deposits it into the payee’s account. Checks that are outstanding for a long period of time are known as stale checks. The payor must be sure to keep enough money in the account to cover the amount of the outstanding check until it is cashed, which could take weeks or sometimes even months. There isn’t anything in the Uniform Commercial Code saying a check has to be dated.

However, I do expect to have those funds by the date written on the check. So, I post-date the check so that the check recipient knows not to deposit that check until that date.

Post-dated cheque

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stale dated check meaning

A returned check is one that has been declined to be honored by a bank. This often happens if there are insufficient funds in the account. Allowing too much time to elapse can increase the chances of a returned check. Most banks will require identification, but it is a good idea to call ahead and ask.

Different Types of Checks That Can Get Stale?

Do not place a stop payment with your bank until you have issued a new check. The policy should state more clearly what you will do if a receiver does not cash a check that you have issued. Another thing you may do is freeze your account to prevent a stale check from clearing. Accounts are often stopped when checks are stolen or there is another probable fraudulent activity, but you can request that your account be frozen. A bank will do everything possible to halt payment on check-in in good faith, but a bank cannot guarantee that the check will not be executed.

How can I cash a check without verification?

Another way to cash your check if you don't have an ID is by signing the check over to someone else. This can be a family member or a friend that you trust. The check can be endorsed if you sign your name and then write “Pay to the order of” on it, then write the full name of the person you trust with this.

Even if both your bank and the issuing bank accept the stale check, it could still be returned for lack of funds. An outstanding check is a check payment that is written by someone but has not been cashed or deposited by the payee. The payor is the entity who writes the check, while the payee is the person or institution to whom it is written. An outstanding check also refers to a check that has been presented to the bank but is still in the bank’s check-clearing cycle.

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Business checks often have a notation stating how long they’re valid, usually between 90 days and one year. If no such statement is present on the check, most banks will exercise their right to refuse a check more than six months old. A common way to identify stale-dated checks is by reviewing regular bank reconciliations. This process highlights checks that haven’t been presented to the bank for payment or uncleared checks. While the UCC places banks under no obligation to cash stale checks, many banks and credit unions may go ahead and cash the check even beyond ​six months​.

The disclaimer here is that banks are not under any obligation to honor a stale-dated check. Further, banks are not required to cash a check for non-customers. While a stale-dated check is not inherently invalid, banks may refuse to honor it as an “irregular” bill of exchange. At this stage, the drawer — also known as the check writer or issuer — must modify the date on a replacement check or issue a new check-in order for the payment to be processed. When a business writes a check, it deducts the amount from the appropriate general ledger cash account.

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When you write a check that goes uncashed, you may wonder what to do. If that’s the case, it’s best to keep the funds available in your account for at least six months. It is common for the terms and conditions of current accounts to state that post-dated cheques should not be written and will be dishonoured if detected.

stale dated check meaning

However, to his dismay, the bank refused to deposit them and declared that those checks as stale. When the accountant found out that these checks had not been deposited in the bank, he sent them out to the bank to be stale dated checks subsequently filled. A company, Gen X Co. issued checks against inventory purchases from ABC Co. in January 2018. However, due to some reason, ABC Co. did not present these checks at the bank until 30th June 2018.

If you have an issue with a stale or expired check, you should contact a financial lawyer who can advise you on the best course of action. There may be legal remedies available to you, as well as other procedures that an attorney can assist you in taking to settle the matter.

  • However, to his dismay, the bank refused to deposit them and declared that those checks as stale.
  • Be considerate — call or text the payer to let them know your intent.
  • Do not place a stop payment with your bank until you have issued a new check.
  • A stop payment order might have been placed on an uncashed check for security purposes.
  • Taken together, these attributes clearly establish RCH’s Uncashed Distribution Checks Service as the most fiduciary-friendly stale-dated distribution check service in the industry.
  • A post dated check is also used when the recipient requires the issuer to hand over a set of post dated checks to cover a series of future payments, which the recipient agrees to cash on the specified dates.

Cheque refers to a bill of exchange, which contains an unconditional order to the bank to pay the specified sum from your bank account. There are two kinds of cheques which are commonly misunderstood are stale cheque and post-dated cheque. A stale cheque is one which cannot be honoured because the reasonable period is expired.

So, yes, you can deposit a post-dated check before the date shown, but it isn’t advised. I called a Wells Fargo branch to inquire about what would happen to the post-dated check if I am the person writing the check.

stale dated check meaning