Cash a check day before pay day?

July 2, 2008 12:06 PM

If I write a check today and it's cashed immediately, but the money to cover it won't be in my account until tomorrow, what happens?

I stopped dealing with analog checks some years back. Most of my transactions these days are digital. I get the impression that, thanks to computers and what-not, things have changed in the banking industry quite a bit in the intervening years. So I feel I'm mostly clueless about current check-related procedures.

The situation:

I get a check at the beginning of the month, always by the third at the absolute latest. But I need the money today, it's only the second, and it hasn't shown up yet.


The questions:

If I write a check today and the recipient cashes it immediately (or if I just write it to cash), what happens? Does the bank look at my account and say "sorry, you don't have this much money" and refuse to cash it? Do they cash it, process it right away, discover that I have insufficient funds, and then hit me for the fees? (And if this happens, do they wait a day or so and then put the check through again?) Or do they cash it, take a day or more to process it - by which time the money has been deposited - and then everything is fine?

Yeah, I know this is not the way to conduct one's finances. Believe me, I don't normally do it this way. It's a pretty special set of circumstances. If you want to post to call me an idiot or tell me this is a bad idea, please also include in your post some information I don't already have or an account of your personal experience with this sort of thing. I figure that's a fair trade-off.

I've explored the possibility of getting a short-term loan (either personal or commercial). It doesn't look do-able and I'd rather not waste my time or yours discussing all the ins and outs of that avenue.

posted by Clay201 to work & money (27 comments total)

Call your bank.
posted by wongcorgi at 12:12 PM on July 2

Please don't. You should only risk this if failure to do so will result in big mafioso guys breaking your knee caps.

At the very least your bank will ding your account for overdraft fees. At the worse the person you're handing the check to will get the run around.

In my experience most people would rather wait 24 hours than receive a check that may bounce... talk to whoever you owe the money to and explain the situation.
posted by wfrgms at 12:13 PM on July 2

Wongcorgi:

I considered that and may yet do it, but am concerned that I might be alerting them that I'm trying to get away with something that they frown upon.
posted by Clay201 at 12:14 PM on July 2

it all depends on who the recipient is and how they cash the check. If it's a store or other merchant, they may present the check electronically, which would immediately be declined. If it's an individual, and they deposit your check in an ATM or at a band not affiliated with yours, I think you can count on at least a 12 hour, if not 24 hour, reprieve. However, I am not your bank, and your bank may have rules and policies in place specifically to extract the maximum penalty from people who do what you're proposing.
posted by cosmicbandito at 12:16 PM on July 2

(I'm assuming you are in the US.) The check will bounce. The recipient will cash the check today and it will go to the clearing house tonight, where your bank will NSF it. You will be charged a fee by your bank, and it will become a black mark on your credit record.
posted by Class Goat at 12:16 PM on July 2

Call your bank and say "Hi, I'm in a bind until tomorrow, can you temporarily increase my overdraft or forgive my monthly fees for right now?"
posted by dirtynumbangelboy at 12:17 PM on July 2 [1 favorite]

Or do they cash it, take a day or more to process it - by which time the money has been deposited - and then everything is fine?

Check processing is much faster since Check 21 was passed. The money will go out of your account overnight.. So if you don't have the funds by the end of the business day, you're in trouble.

Do they cash it, process it right away, discover that I have insufficient funds, and then hit me for the fees?

Depends on your history with the bank. If you're not a new customer, they may clear the check and then slap you with insufficient funds fees. This is assuming that the check is not outside your normal transaction range (e.g. you usually write checks for $1,000 or less but this one is for $4,000).

It's best to call your bank and ask.
posted by special-k at 12:20 PM on July 2

If memory serves me correctly (and it rarely does), you would probably be OK if you wrote the check after the close of business hours for banks (this pretty much assumes the person you write the check to is in your time zone, which seems reasonable). If they deposit via ATM tonight, that shouldn't hit your account until tomorrow. Calling your bank is still a pretty solid idea.

That said, you can't be 100% sure that the check owed to you is going to arrive tomorrow... and writing a check for money you don't have is always a risky proposition.
posted by RossWhite at 12:24 PM on July 2 [1 favorite]

In most situations, if the recipient goes into your bank and cashes your check, the teller will decline it due to insufficient funds. If the recipient deposits the check to their own account instead of cashing, then their bank will process the check with this evening's work, and your bank will not receive it until tomorrow (assuming you and the recipient use different banks), at which point you will presumably have the funds and be fine.

it will become a black mark on your credit record.
Having one OD item will not have any effect on your credit record. It may have a small effect on your internal history with your bank, but even then, they usually wait until you have a pattern of overdraft activity.
posted by logic vs love at 12:27 PM on July 2

Well, it depends on your bank. I have overdraft protection for a certain amount. If for some reason I write a check for moire than is in my checking account balance, they automatically transfer the funds from the overdraft account, and then it acts like a credit card balance. If I pay it off next day, no harm, no foul.
posted by genefinder at 12:38 PM on July 2

That said, you can't be 100% sure that the check owed to you is going to arrive tomorrow... and writing a check for money you don't have is always a risky proposition.

Risky, as in technically a criminal act. Writing a check (which is technically a form of contract) which you knowingly don't have funds to cover is fraud. The banks have methods of dealing with it internally (NSF fees) because it's cheaper than pursuing criminal action, but theoretically they could take legal action against you.
posted by Morydd at 12:40 PM on July 2

As much as I hate to say it, I do this sort of thing all the time. Technically it is illegal to write a check on an account with insufficient funds...but usually, even if the recipient deposits the check the same day you give it to them, it still takes a day or two to get processed at their bank, routed out to your bank, and then processed there. Unless the recipient uses the same bank you do, you will probably be ok. If they use the same bank, they will check your funds and decline to cash the check. If they use a different bank, then most banks will cash it and charge you fees, or even let your account go negative and send you a letter asking you to correct it.

just my two cents.
posted by AltReality at 12:52 PM on July 2 [1 favorite]

Does the bank look at my account and say "sorry, you don't have this much money" and refuse to cash it? Do they cash it, process it right away, discover that I have insufficient funds, and then hit me for the fees? (And if this happens, do they wait a day or so and then put the check through again?)

This totally depends on how your bank works, and whether or not you have overdraft protection. If I were to try this, my bank would cash the check, then hit me with a fine for overdrawing my account. I don't think the recipient of the money would know I was overdrawn, but I'm not positive. But if you don't have overdraft protection, they would most likely refuse to cash it. Call your bank and ask. The customer service rep won't care or think you're up to anything shady if you word it correctly; just tell them you want to make sure you understand your account so that you don't overdraw.

Or do they cash it, take a day or more to process it - by which time the money has been deposited - and then everything is fine?

That almost never happens with most modern US banks, not anymore. The check process is way way faster than it used to be.

Can you give this person the check tonight, after the banks have closed? Their only choice for cashing it would be to deposit it into an ATM, or wait until the banks open tomorrow, and either way that should be enough time for your money to arrive.
posted by boomchicka at 12:57 PM on July 2

I considered that [calling the bank] and may yet do it, but am concerned that I might be alerting them that I'm trying to get away with something that they frown upon.

Don't be afraid to call your bank. You're not "trying to get away with something," you're just trying to figure out how to manage your current situation. Believe me, your situation (e.g. you don't have the money today but you will definitely have it tomorrow) is very common and they won't think less of you for it.
posted by amyms at 1:03 PM on July 2 [1 favorite]

it will become a black mark on your credit record.

I just noticed that. I don't think that's true, not for one bounced check. I think you have to be a habitual check-bouncer, and even then I don't know that the info makes its way to the credit bureaus. Check into it if you're worried, of course, but I don't think your credit will be at risk if you bounce this one time.
posted by boomchicka at 1:10 PM on July 2

it will become a black mark on your credit record.

I'm pretty sure it doesn't impact your FICO score.
posted by Brian Puccio at 1:24 PM on July 2

Unless your bank is run by saints, I would bet that it would go something like this:

(1) Person deposits check into their account
(2) The next day, your bank runs their accounts.
(3) They run all the debits against your account before any deposits.
(4) Even if the deposit went in the same day, the check gets hit with NSF because of (3).
(5) You pay a fee, or several.
(6) The person you wrote the check to gets hit with a fee for depositing an NSF check.
(7) You're eventually out the money for the check, for your fee, and probably for the depositor's fee.
posted by ROU_Xenophobe at 1:28 PM on July 2

I did this once, and it didn't hurt my credit. I like to mail my rent check several days in advance to ensure that it arrives on time, and my landlord has promised to honor the 1st-of-the-month date written on the check. My paychecks are direct-deposited on the 30th of the month, so this usually works out pretty nicely. One time the landlord didn't notice the check date, and cashed it several days before my paycheck came in. (So, note for the future: banks don't care what date is written on the check.) The bank cashed the check, and hit me with the overdraft fee, so the landlord had no idea what had happened. Luckily I was able to get the bank to drop the overdraft fee, since I had been a long time customer with no previous trouble (and I was only overdrawn by $7!!!) I don't recommend planning to do this kind of thing, but if it does happen you might be able to fix it with a polite phone call to your bank.
posted by vytae at 1:30 PM on July 2

If the question is whether it is possible a check will be posted to your account today, the answer is yes, it is possible. It depends entirely on your banks systems and protocols and how the recipient cashes the check. But yeah, the way things go today this could absolutely get turned around and posted to your account today or tomorrow before your deposit posts.

If you do not, someone may cash the check for the recipient depending on how the check is cashed, but when it turns out to have bounced they will charge it back to the recipient. The worst case scenario is, the recipient of the check will be fined by their bank for passing a bad check to them and demand the money back, your bank will charge you for having an overdraft, you will still owe the recipient whatever you owe them, and they will (correctly) hit you for their fines as well. This happened to a friend of mine, he ended up paying $45 for a cheeseburger.

You have to consider whether this scenario is worse than delaying whatever payment you are facing by a day.

As others noted, though it does no immediate good for your situation, banks offer overdraft protection (which usually boils down to a bigger fee, which beats bouncing a check in my book) or overdraft lines of credit, where the money you overdraft basically gets treated like a cash advance, ie potential upfront fee plus high interest on the loan).
posted by nanojath at 1:45 PM on July 2

(second paragraph should start "If you do not have overdraft protection...")
posted by nanojath at 1:46 PM on July 2

Two more thoughts for you.

Even if you put your deposited check in the bank tomorrow, you may not receive credit for all those funds. Depending on where the check is coming from, the bank will probably put some kind of hold on it. Every bank is different, mine will make only $100 available on the day of deposit, and then the rest within 1-5 days, I think. So if you write checks on this account thinking that you have the funds tomorrow, you may be digging a deeper hole.

If the deposit you're receiving is direct deposit, give your bank a call and see if you've got the credit for it already. It may not be showing on your detailed statement, but if it's due to be credited tonight, they may have a memo credit on your account. That means the funds could be available today and that will save you a lot of trouble.
posted by saffry at 1:49 PM on July 2

Note carefully what Xenophobe said:

>They run all the debits against your account before any deposits.

Even if you write a check late today, with the idea that it will not be presented (that is the technical term) until tomorrow, and you plan to make a deposit tomorrow to cover it, you are not in the clear.

If you show up at 9 a.m. tomorrow and make the deposit, the bank will not make a note of that credit until the close of business tomorrow. Anything presented in the meantime will bounce.

This sort of brinksmanship is not good for your mental well-being.
posted by yclipse at 2:45 PM on July 2

On preview: Warning, long reply!

> it will become a black mark on your credit record.

Not in and of itself. The only way this could happen is if the check is returned NSF, you don't make good, and the business you wrote it to sends it to a collection agency. If that happens, the CA may report your delinquency to one or more of the reporting bureaus which will impact your report and FICO score. Luckily you have enough say in the process such that this is a very unlikely scenario unless you're purposely writing bad checks that you intend to ignore.

> If you show up at 9 a.m. tomorrow and make the deposit, the bank will not make a note of that credit until the close of business tomorrow. Anything presented in the meantime will bounce.

Any comments containing "your bank WILL" need to be taken with a grain of salt... EVERY bank is different, and your results may depend on their specific methods of handling transactions. I have three accounts at different banks... one always processes all deposits to the account on a given business day before they process any debits. Another will process them at the time they come in and take action based on the status of the account at that instant. I'm honestly not sure what the other one does since I've not yet had any reason to know. All this points to several similar suggestions: Call your bank to find out exactly how they do things. Every scenario described above is certainly possible, but your bank has the final say.

Their policies, your history, and your balance will also probably have a bearing on what they will do. If you're $5 overdawn on a $50 check with good history otherwise, they'll probably charge you an OD fee and honor the check. If you have $50 in your account and a $500 check comes through... back it goes as NSF, most likely.

As for your specific situation, a lot depends on who you're writing it to and how it's deposited:

-You write a check for cash: Not enough in your account, they will refuse.
-Recipient tries to cash it at your bank: Ditto.
-Recipient deposits it at their bank: It will be accepted, and post to your account either tonight (regardless of whether they do it before or after 3pm), or within a day or two. Depends on not only your bank but the bank that receives the deposit. If the deposit and the check get to your bank the same day, what happens again depends on your banks handling policies.
-Recipient deposits it in an ATM: If it's an ATM at a branch of that recipient's bank, it's entirely possible it'll get processed that night just as if they had walked in and deposited it with a teller... in my experience, most of the time they gather the deposits from in-bank ATMs at the end of the business day and process them with the rest of the teller-based activity. I'll sometimes transfer money between accounts using ATM deposits, and the check has been presented anywhere from the next day to 3-4 days later. ATMs are much more of a crap shoot.

For a handwritten check that gets returned NSF, it's not unheard of for a business to re-present the check to your bank once; usually the smaller the business the more likely this is to happen, since this requires someone to actually have it in their hand and make one more stab at putting it in the deposit bag. Electronic payments to businesses will do this more frequently. But be careful in both instances; many places have policies that you agree to when you pay by check (paper or otherwise) that say they have the right to make a second attempt to deposit your check with an additional fee tacked on... i.e. you may write a $10 check, it bounces, and they'll try to reprocess the check, except it'll be for $40 this time, not $10.

Also, as saffry pointed out , if you deposit a paper check, the bank may or may not make all of those funds available immediately... that's another issue that depends on your bank's policies, the type of check, the amount of the deposit, and the originating bank and its location.

IANYB, but all of the above comes directly from my own personal experience. YMMV, but because of all the variables it's simply a good idea to avoid the situation altogether. Overdraft protection can help avoid any issues with the recipient since they're none the wiser, but that only means you may end up paying only $25 for that cheeseburger instead of $45.
posted by SquidLips at 3:43 PM on July 2

If the recipient uses the same financial institution you do, the check could clear very quickly. The one time I've deposited a check in person from someone who used the same credit union, it was treated as quickly as an inter-account transfer.

If I set it up right, I could easily write a check to this person and have it clear before the ink was dry.
posted by oaf at 7:58 PM on July 2

What you're talking about is called check kiting. Most check kiting schemes (and laws against it) are rather more complicated / devious than what you're talking about.

Anyway, it's 11pm, I hope you worked it out. At the very least you probably learned something from today's experience ...
posted by intermod at 8:05 PM on July 2

Is the situation so dire that your recipient wouldn't be able to accept a post-dated cheque? (Let us know what happened!)
posted by Phire at 10:03 PM on July 2

Phire, checks in the U.S. can be negotiated as soon as they are written, even if they're post-dated.
posted by oaf at 10:32 AM on July 4